Markets to extend the gains with a strong start

The Indian markets in a huge post budget rally posted their biggest one day gain in last five years. Today, the start is likely to be sanguine and there could be another strong opening with benchmarks extending their gains on jubilant global cues. Meanwhile, Revenue Secretary Hashmukh Adhia has said that the Budget has attempted to make domestic industry competitive, fuel demand and create jobs. He added that new cesses and duty hikes may have made cars and garments costlier but Finance Minister Arun Jaitley’s focus in the Budget 2016-17 was job creation and making taxation simpler, not resource mobilization. The auto sales numbers for the month of February will keep the auto stocks buzzing. On the other hand the Aviation stocks are likely to witness some pressure, as the Aviation Turbine Fuel (ATF), or jet fuel, price has been hiked by 12 percent, the hike follows three consecutive price reductions.  

The US markets bounced back on some upbeat economic data in last session. While the Institute for Supply Management showed a bigger than expected increase, the Commerce Department showed a notable increase in construction spending in the month of January. The Asian markets have extended their jubilation with a strong start, led by the surge in Japanese markets of over four percent gains. The Chinese market too was trading higher despite the yuan weakening after China’s central bank lowered the currency’s reference rate and Moody’s Investors Service cut the outlook on the nation’s credit rating.

Back home, Indian equity indices showcased a stunning performance and went on to outclass indices around the world by vivaciously rallying over three percentage points in the session and settling above the psychological 7,200 (Nifty) and 23,700 (Sensex) levels. Investors continued to build hefty positions across the board as sentiments got a boost after Finance Minister Arun Jaitley retained FY17 fiscal deficit target at 3.5 per cent of GDP despite increasing expenditure for rural and infrastructure spending.  Finance Minister has also assured that the development agenda will not be compromised and a committee will be set up to review the working of fiscal responsibility and Budget management.  Appreciation in Indian rupee too supported the sentiments. Hardening further for the third straight day, Indian rupee rose 38 paise to 68.04 against the dollar on sustained selling of the US currency by banks and exporters.  Also, Index heavyweight ITC made its presence felt by bouncing back and surging over ten percent in the session after the government hiked the excise duty on cigarettes by 10%. Some support also came with the report that the growth in the eight core sectors jumped to a three-month high of 2.9 per cent in January due to sharp pick-up in coal, cement and electricity generation. Furthermore, manufacturing business conditions in India continued to improve, with new orders, exports, output and purchasing activity all rising in February. At 51.1 in February, unchanged from January's reading, the seasonally adjusted Nikkei India Manufacturing Purchasing Managers' Index (PMI), pointed to a second consecutive monthly improvement in business conditions across the sector. Meanwhile, the uptick in global markets also buoyed the sentiment after China's central bank further cut the reserve requirement ratio by 0.5%, European shares extended the previous session's gains on Tuesday. Earlier the start of the markets was good and the marketmen seemed to have analyzed the impact of the budget on different sectors and remained on buying spree from the very beginning. Initially it remained selective buying but as the trade progressed it turned broad based and there was no looking back for the markets till the last breath with benchmarks closing near their high points of the day. Finally, the BSE Sensex surged by 777.35 points or 3.38% to 23779.35, while the CNX Nifty rose 235.25 points or 3.37% to 7,222.30.