Markets to make flat-to-positive start on budget day

Indian equity benchmarks ended slightly lower on Wednesday, as investors awaited cues from budget that will be the last full year budget of the government before next year’s Lok Sabha election. Today, the start is likely to be flat-to-positive as traders will be watchful ahead of the budget 2018, to be presented by Finance Minister Arun Jaitley later in the day. Investors are eagerly awaiting the federal budget, as the government aims to woo back rural voters and small businesses ahead of state elections. Some cautiousness may come with report that growth of the eight core sectors slowed to a five-month low of 4% in December 2017 due to negative performance of segments like coal and crude oil. The output growth recorded in December is the lowest since July 2017, when these core sectors had witnessed 2.9% expansion. However, traders may get some support from report that the Central Statistics Office has revised the Gross Domestic Product (GDP) growth rate for 2015-16 to 8.2 per cent from the earlier estimates of 8 per cent and kept the 2016-17 growth unchanged at 7.1 per cent. The real GDP or GDP at constant (2011-12) prices for the years 2016-17 and 2015-16 stands at Rs 121.96 lakh crore and Rs 113.86 lakh crore respectively, showing growth of 7.1 per cent during 2016-17 and 8.2 per cent during 2015-16. Auto stocks will be in focus today, on declaring their monthly sales number for January. There will be lots of important earnings announcements to keep the market buzzing for the day.

The US markets ended with marginal gains on Wednesday after the Federal Reserve announced its widely expected decision to leave interest rates unchanged. The Fed’s accompanying statement was seen as slightly more hawkish, reinforcing expectations the central bank will raise rates at its next meeting in March. Asian indices were trading mostly in green as economic data from around the region improved. Japanese markets edged higher as a weaker yen lifted investor sentiment.

Back home, Indian equity benchmarks ended the Wednesday’s trade with marginal losses, as traders opted to stay away from buying risky assets ahead of upcoming budget to be released on February 01, 2018. Markets started the session on pessimistic note and extended losses to breach their crucial 11,000 (Nifty) and 35,900 (Sensex) levels, as traders remained cautious with Chief Economic Adviser Arvind Subramanian’s statement that elevated stock prices are a matter of concern and could correct sharply if they are not backed by growth, requiring ‘heightened vigilance’. Subramanian added that the situation was similar to the US in 2006 and he cannot prevent the run-up but can control the cleanup. So, if something happens, he can lower interest rates and inject money into the economy. Subramanian said the macro environment had turned adverse with oil prices having risen above $60 a barrel and staying there, the interest rate cycle changing globally and elevated asset prices in India and across the world. However, markets took some support near day’s lows and pared most of their early loses with traders taking solace with report that India has been ranked sixth in the list of wealthiest countries with total wealth of $8,230 billion, while the United States topped the chart. Traders also get some comfort with ratings agency Moody’s statement that recently introduced goods and services tax (GST) mechanism is still a work in progress that will ultimately result in formalisation of economy. It added that it was a necessary step to help banks and such reforms should continue. Traders also took some comfort with rating agency ICRA enlightening that with banks credit outpacing deposits in the last few months, pushing up the credit-deposit ratio, lenders are likely raise deposit rates in the near-term. Besides, ahead of the February 1 Budget, a debate has been brewing about the exemption of long-term capital gains tax on stocks. Finally, the BSE Sensex declined 68.71 points or 0.19% to 35,965.02, while the CNX Nifty was down by 21.95 points or 0.20% to 11027.70.