Benchmarks turn choppy after a positive start

A bout of volatility witnessed in the early trade on Monday and key benchmarks have started off the week and first day after Budget with decent gains, but immediately wiped out all gains with Nifty dropping below its crucial 5,300 level as the investor sentiment continued to be weak on the Union Budget failing to bring cheer to markets. However, Nifty regained the important 5,300 mark afterwards as slightly better trend on the other Asian bourses capped the losses. Asian shares edged higher and the dollar was firm against the yen on Monday with investors buoyed after the US market hit an almost four-year high last week and with higher European stocks reflecting signs of growing stability in the euro zone. Back home, no rate cut by the Reserve Bank of India in the monetary policy review last week also weighed down on the investor sentiment. Meanwhile, Cement manufacturers such as ACC and Ambuja Cement edged higher in the trade after announcing price hikes of 7-10 rupees for a 50kg bag after the budget announced on Friday. The broader indices were outperforming benchmarks while, the market breadth on the BSE was positive; there were 849 shares on the gaining side against 708 shares on the losing side while 57 shares remained unchanged.

The BSE Sensex opened at 17,531.47; about 65 points higher compared to its previous closing of 17,466.20, and has touched a high and a low of 17,561.46 and 17,360.28 respectively.

The index is currently trading at 17,433.78, down by 32.42 points or 0.19%. There were 11 stocks advancing against 19 declines on the index.

The overall market breadth has made a positive start with 52.60% stocks advancing against 43.87% declines. The broader indices were outperforming benchmarks; the BSE Mid cap and Small cap indices rose 0.29% and 0.14% respectively.

The top gaining sectoral indices on the BSE were, CD up by 0.98%, Auto up by 0.56%, FMCG up by 0.45%, Metal up by 0.33% and HC up by 0.28%. While, Bankex down by 0.78%, IT down by 0.77%, TECk down by 0.55%, PSU down by 0.41% and CG down by 0.25% were the top losers on the index.

The top gainers on the Sensex were M&M up by 1.57%, Sun Pharma up by 1.45%, Tata Motors up by 1.34%, Sterlite Industries up by 1.05% and ITC up by 0.72%.

On the flip side, TCS was down by 2.10%, HDFC was down by 1.66%, ONGC was down by 1.43%, Hero MotoCorp was down by 1.35% and SBI was down by 1.21% were the top losers on the Sensex.

Meanwhile, the Finance Minister, though has been appreciated for being honest about the government’s fiscal deficit in his budget, without trying to paint a rosy picture, but he himself has admitted that the fiscal deficit this year will cross its budgeted estimates substantially and will continue to be on the upside in the next fiscal as well. Fiscal deficit has overshot its budgeted estimate of 4.6% of GDP in FY 12 by a good percentage point and is expected to be around 5.9%, however it has been pegged lower at 5.1% of GDP for FY ‘13.

The scaling down of the deficit from 5.9% to 5.1% in FY 13, looks reasonable but some say it may not be realistic as we may actually see a number close to 5.5% by the end of next year. As per the FM the fiscal deficit shot up its estimates primarily due to a rise in the subsidy bill for petroleum and fertilizer. Although he has not made any specific attempt to curb this burden, the budget has also not seen any announcements in terms of big ticket government schemes. In fact a cap of 2% on expenditure of subsidies has been targeted for the next year which may actually help the government in keeping its subsidy bill under check. Over the next three years, it has proposed to bring down the subsidy burden further to 1.75% of GDP.

On the revenue side, the Budget has attempted to increase its revenue through an increase in indirect taxes instead of increasing the direct taxes. Service tax and excise duty rates have been hiked form 10% to 12% and the service tax base has been widened. Though raising indirect taxes may not be the most ideal way of raising revenue (as it can be inflationary), it has been done with a view of not curbing demand and subsequently  growth. Greater emphasis has also been planned on all forms of investment especially on infrastructure and in agriculture to overcome the supply constraints. 

Going forward, the fiscal deficit target could however come under pressure if the Parliament passes the Food Security Bill and if the global crude oil prices go over $115 a barrel. The government will also have to go in for gross market borrowings of Rs 5.70 lakh crore, which is 11.5% higher than Rs 5.10 lakh crore estimated for this financial year.

The S&P CNX Nifty opened at 5,337.35; about 20 points higher compared to its previous closing of 5,317.90, and has touched a high and a low of 5,340.70 and 5,281.70 respectively.

The index is currently trading at 5,309.65, down by 8.25 points or 0.16%. There were 20 stocks advancing against 30 declines on the index.

The top gainers of the Nifty were RCom up by 1.85%, Tata Motors up by 1.76%, M&M up by 1.74%, Sterlite Industries up by 1.49% and Reliance Power up by 1.23%.

On the flip side, IDFC down by 2.35%, TCS down by 2.30%, Kotak Bank down by 1.79%, HDFC Bank down by 1.73% and HDFC down by 1.42%, were the major losers on the index.

Most of the Asian equity indices were trading in the green; Hang Seng was up 57.11 points or 0.27% to 21,374.96, KLSE Composite was up 1.94 points or 0.12% to 1,573.34, Nikkei 225 was up 30.18 points or 0.30% to 10,160.01, Straits Times was up 11.05 points or 0.37% to 3,021.73 and Seoul Composite was up by 8.54 points or 0.42% to 2,042.98.

On the flip side, Shanghai Composite was down 12.26 points or 0.51% to 2,392.48, Jakarta Composite was down 1.23 points or 0.03% to 4,027.31 and Taiwan Weighted was down 16.14 points or 0.20% to 8,038.80.