Markets to make a soft-to-flat start after big rally of last session

The Indian markets went for a rally on the big day of budget and the major benchmarks surged close to two percent, getting relief from the budget where there was no hike in STT and the long term capital gains rules were untouched. Today, the start is likely to be mildly soft-to-cautious and consolidation mood may prevail after the humungous rally, however there will be some support with US Federal Reserve holding interest rates steady in its first meeting since President Donald Trump took office. Traders will be taking bet after analyzing the budget fine prints. Finance Minister Arun Jaitley though maintained fiscal prudence in the Budget, the foreign investors may have some renewed interest as the Finance Minister tweaked the domestic transfer pricing rules and exempted some FPIs from indirect transfer provision. He also further clarified the GAAR rules. The Infra stocks will be in limelight once again, as infra got a major push in the budget with announcement of reduced corporate income tax rates for medium and small enterprises (MSME), infrastructure status to affordable housing, allocation of Rs 500 crore for setting up Mahila Shakti Kendra at village level and expansion of BharatNet project besides many other. There will be lots of important earnings announcements too, to keep the markets buzzing.

The US markets ended higher in last session after a lackluster trade, the gains came following the Federal Reserve's widely expected decision to leave interest rates unchanged. The Fed reiterated that the path of the federal funds rate would depend on the economic outlook as informed by incoming data. The Asian markets have made a mixed start, digesting a raft of earnings reports. The Japanese market was trading lower as the yen turned strong against dollar after Fed kept its policy rates unchanged.

Back home, Indian benchmark indices staged a smashing performance on Wednesday by vehemently rallying over one and half percent in the session and re-conquering their psychological levels. Investors continued to build hefty positions across the board as finance minister Arun Jaitley made no reference to long-term capital gains tax on equities, and also set a comfortable fiscal deficit target of 3.2% for the fiscal year 2017-18. He also propose to infuse Rs 10,000 crore in public sector banks and allocating a record Rs 3.96 lakh crore to infrastructure sector as well as granting infra status to affordable housing. The focus of the budget continues to remain on improving the macros as government has not succumbed to the populist expectations. He also delivered a big relief to foreign portfolio investors (category I and II) by exempting them from indirect transfer provisions (Vodafone tax). The Finance Minister made it clear that he does see demonetisation’s effect spillover to the next fiscal. According to Jaitley, India's Current Account Deficit declined from about 1% of GDP last year to 0.3% of GDP in first half of 2016-17. Adding optimism among investors, Prime Minister Narendra Modi described the Budget as ‘futuristic’ with an aim on fulfilling the ‘dreams’ of every section, including the poor, the farmers and the under-privileged, while focusing on job creation, transparency, urban rejuvenation and rural development. He said the Budget is a key link between the work done by his government over the last two-and-a-half and the steps that it will be taking in the future as part of its vision to take the country on the path of development. Furthermore, market participants got some comfort after Nikkei Markit India Manufacturing Purchasing Managers’ Index (PMI) monthly survey rebounded from demonetization downturn in January amid rising order books, production as well as buying levels and the expansion in the sector by increasing 50.4 in January from 49.6 in December. Some support also came with report that Growth in eight core sectors expanded at a faster pace of 5.6% in December 2016, against the 4.9% growth recorded in November 2016, supported by double-digit expansion in the steel sector. Meanwhile, shares of irrigation and fertiliser companies rose after Jaitley, in his Budget presentation said the agriculture sector is expected to grow at 4.1% in 2016-17 thanks to better monsoon, while real estate stocks moved higher on a slew of budgetary stimulus to real estate sector. However, IT stocks continued to fall on visa fears as H1B visa Bill to double minimum wages for H1B visa-holders was tabled in the US Congress. Finally, the BSE Sensex gained 485.68 points or 1.76% to 28141.64, while the CNX Nifty was up by 155.10 points or 1.81% to 8,716.40.