Markets likely to get positive start of new week

Indian markets extended their winning run to the fifth session and ended higher on Friday after the Reserve Bank kept interest rates unchanged but continued its accommodative stance to revive growth. Today, the start of new week is likely to be optimistic tracking strong global cues. Traders will be taking encouragement with Expenditure Secretary T V Somanathan’s statement that the government is confident of lowering the fiscal deficit to 4.5 per cent of GDP by 2025-26 fiscal, considering a nominal GDP growth of 10 per cent every year. Some support will come as principal economic advisor Sanjeev Sanyal said to boost the pandemic-hit economy, the government of India is committed to higher capital expenditure not just in the coming fiscal year but over the next three years. He added that a sharp hike in capex in the recently announced Union Budget reflects the government’s economic strategy of rebuilding battered demand while ensuring that the supply side is expanded enough to move in tandem. Traders may take note of report that foreign portfolio investors (FPIs) remained net buyers to the tune of Rs 12,266 crore in the Indian market in the first five trading sessions of February, as positive sentiment post-Union Budget 2021 sparked a rally in investment. However, there may be some cautiousness with report that India reported 11,673 fresh Covid-19 cases on Friday pushing the overall tally to 10,838,843, according to Worldometer. The death toll from the deadly infection jumped to 155,114. Meanwhile, Economic Affairs Secretary Tarun Bajaj said the government will borrow about Rs 12 lakh crore for the next fiscal year at a reasonable rate and expressed hope that the yield would be around the current year's level. Market participants will be eyeing the industrial production data for December and CPI inflation for January that are slated to be out on Friday, February 12. There will be some buzz in pharma stocks with report that India's exports of pharmaceutical products during April-December 2020-21 grew by 12.43 per cent to $17.57 billion. Minister of State for Commerce and Industry Hardeep Singh Puri said India's exports of pharmaceutical products have not declined and they are growing consistently. Banking stocks will be in focus with Moody's Investors Service’s report that the government's support measures for bank borrowers have softened growth in non-performing loans, averting the risk of a sharp asset quality deterioration. There will be some reaction in steel industry stocks with ICRA’s report that the reduction of duty on steel products, as proposed in the Budget 2021-22, may bring down prices of the metal by up to 10 per cent in the near term.

The US markets ended higher on Friday, wrapping up a strong week on Wall Street as investors hoped a disappointing January jobs report would increase the likelihood of further stimulus. Asian markets are trading mostly in green on Monday on hopes a $1.9 trillion COVID-19 aid package will be passed by US lawmakers as soon as this month just as coronavirus vaccines are being rolled out globally.

Back home, Indian equity benchmarks managed to eke out modest gains, ending higher for the fifth straight session. Markets made an optimistic start, as traders took some support with Finance Minister Nirmala Sitharaman exuding confidence that the disinvestment calendar announced in the Union Budget will work well. She added the government is confident that revenue generation will improve through this year and it will be bringing in non-tax revenue other than just disinvestments through various routes, including monetisation of assets. Sentiments remained positive with Economic Affairs Secretary Tarun Bajaj’s statement that the government is sticking to the target of becoming a $5 trillion economy by 2024-25 and emphasis on infrastructure sector and other initiatives taken in Budget 2021-22 are aimed at achieving the goal. The spending on infrastructure has gone up from Rs 4.12 lakh crore to Rs 5.54 lakh crore while on the health sector it has risen to Rs 2.23 lakh crore from Rs 94,000 crore in the Budget Estimate for 2020-21. However, indices erased most of their initial gains and traded with volatility, after Reserve Bank of India (RBI) decided to leave benchmark interest rate unchanged at 4 per cent but maintained an accommodative stance, implying rate cuts in the future if need arises to support the economy hit by the COVID-19 pandemic. The benchmark repurchase (repo) rate has been left unchanged at 4 per cent, Governor Shaktikanta Das said while announcing the decisions taken by the central bank's Monetary Policy Committee (MPC). But, key gauges managed to end the session in green, as International Monetary Fund (IMF) welcomed India's Union Budget for focussing on growth and said fiscal policy can and should play an important role in facilitating a strong and inclusive economic recovery. IMF’s Director of Communications, Gerry Rice has said that the Union Budget rightly focuses on health, education, public infrastructure and, if fully implemented, can help increase India's growth potential. Finally, the BSE Sensex rose 117.34 points or 0.23% to 50,731.63, while the CNX Nifty was up by 28.60 points or 0.19% to 14,924.25.