Markets likely to get a cautious start on budget response

The Indian markets suffered sell-off in last session after the announcement of union Budget, though there was not much on the negative side but it equally remained silent on some key issues and that led the sentiments lower for the market. Today, the start is likely to be cautious as by now the budget impact might have got cooled down; still there will be lots of sector specific actions. There will be some enthusiasm in the markets as lowering of security transaction tax will help reduce the cost of transaction in the equity markets. Textile stocks related to readymade garments will remain in focus after getting some relief in the budget, while the auto companies are likely to take some hit with the duty hike. There will be some jitters from the political front too, as Dinesh Trivedi has finally quit as Railway Minister and Mukul Roy is likely to take over as the new Railway Minister.

The US markets closed marginally down on Friday though, the losses were considerably lower and the markets gained for the week. The decline in consumer confidence weighed on the sentiments. The Asian markets have made a mixed start of the new week with some indices trading lower by quarter to half a percent. Though the trade is quiet but there were some positive reports from the region that have helped the markets; consumer confidence in New Zealand and South Korean department store sales rose in the last month. However, the Chinese market was trading lower despite the report that the country imported lesser arms as local industry expanded.

Back home, the much awaited Union Budget 2012-13 proved to be a depressing one for the stock markets in India as the ruling government chose to play it safe at a time when absolutely nothing seemed to be going its way and remained muted on major reforms that the market participants desperately waited for. Indian stock markets commenced the day on a promising note with a positive start despite the cautious cues from Asian markets. The markets got underpinned soon after the Finance Minster started divulging the details of Union Budget 2012-13. Just when it looked like the benchmark equity indices would spurt to higher levels sailing beyond the psychological 17,900 (Sensex) and 5,450 (Nifty) levels, sentiments got spooked as Pranab Mukherjee proposed to hike excise duty and service tax that did not go down well with investors.  The volatile trading session saw investors square of positions largely across the board as they even overlooked the measures aimed at increasing participation of retail investors in stock markets, including a tax-saving scheme for first-time investors, 20% STT cut to 0.1% by the government to reduce transaction costs in the capital markets. The ambitious budget which appeared full of tall promises lacked a concrete roadmap as it failed to spell out how the government will go about fulfilling them. Investors booked hefty profits in the Oil & Gas counter which bore the maximum brunt of selling pressure plunging over 3% followed by the Power and Capital Goods sectors which got thrashed by close to three percent each. The banking index which traded on a positive note earlier in the session after Budget proposed to provide a sum of Rs 15,880 crore capital support to all public sector banks, plunged by the end of day’s trade. However, investors were seen piling up positions in defensive FMCG which settled with about 2% gains while some carmakers gained traction since increase in the excise duty on all products in the Budget for 2012-13, would lead companies like Maruti Suzuki and Mahindra & Mahindra to hike prices of their vehicles. Also shares of select broking firms cheered the Finance Minister's announcement to reduce securities transaction tax and introduce tax sops for new equity investors, in the Union budget for FY 2013. Finally, the BSE Sensex shaved off 209.65 points or 1.19% to settle at 17,466.20, while the S&P CNX Nifty plunged by 62.60 points or 1.16% to close at 5,317.90.