Benchmarks likely to start session on positive note

Indian markets jumped around 1.5 percent on February 1 as investors cheered the Finance Minister's Union Budget announcements. Today, benchmarks are likely to start the session on a positive note tracking firm global cues. Traders will be getting encouragement as Chief Economic Adviser V Anantha Nageswaran expressed hope that India would become a $5 trillion economy by FY26 or the next year on the back of 8-9 per cent sustained growth. He added gross domestic product (GDP) in dollar terms has already crossed $3 trillion. Some support will also come as provisional data of the commerce ministry showed that the country's exports rose by 23.69 per cent to $34.06 billion in January on healthy performance by engineering, petroleum and gems and jewellery segments even as trade deficit widened to $17.94 billion during the month. Traders may take note of report that Commerce and industry minister Piyush Goyal said his ministry is in talks with the finance ministry to allow firms in the special economic zones (SEZs) to sell goods in the domestic market by paying just an equalisation levy. However, some cautiousness may come as rating agency Moody’s said the Union Budget lacks any tangible measures to increase revenue generation even though the capital expenditure plans have gone up significantly and the fiscal deficit estimate suggests that the government is relying too much on strong growth to help drive fiscal consolidation. Aviation industry stocks will be in focus as Jet fuel price rose to record levels across the country following a steep 8.5 per cent hike necessitated due to a spike in international oil prices. There will be some reaction in power stocks as the power ministry data showed that India’s power consumption grew marginally at 2.6 per cent year-on-year in January to 112.67 billion units (BU), showing the impact of local restrictions imposed by states amid the third wave of COVID-19. Power consumption in the entire January last year was 109.76 BU, which was 4.4 per cent higher than 105.15 BU in January 2020.

The US markets ended higher on Tuesday as Exxon's strong financial results sent the energy index to a multi-year peak. Japan market is trading in green on Wednesday following strength in Wall Street indices.

Back home, Indian equity benchmarks gave a thumbs up to the Union Budget on Tuesday, ending the session on a positive note for the second straight session. Markets made gap-up opening, as traders took encouragement with newly appointed Chief Economic Advisor (CEA) V Anantha Nageswaran’s statement that abatement of the COVID-19 pandemic would kick in virtuous cycle investment leading to job creation. He also said the government has taken various steps to support lower income categories. Markets gained traction in late morning session after Finance Minister Nirmala Sitharaman unveiled a Budget that aims to boost growth amid continued disruption from Covid-19 and rising inflation. Sitharaman unveiled a bigger Rs 39.45 lakh crore Budget, with higher spending on highways to affordable housing with a view to fire up the key engines of the economy to sustain a world-beating recovery from the pandemic. Her Budget for the fiscal year beginning April 2022 proposed a massive 35 per cent jump in capital expenditure to Rs 7.5 lakh crore, coupled with the rationalisation of customs duty, an extension of time for setting up new manufacturing companies and plans for starting a digital currency and tax crypto assets. However, markets witnessed a fair bit of volatility post the Budget speech. Traders turned cautious after Indian manufacturing activity fell in the month of January, but stayed above the 50 mark that separates growth from contraction. As per the survey report, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) - a composite single-figure indicator of manufacturing performance - eased to 54.0 in January from 55.5 in December.  Some concern also came with the data released by the Controller General of Accounts showed that the Centre's fiscal deficit rose to 50.4 percent of the FY22 target in April-December 2021, with a huge increase seen in tax collections as well as capital expenditure for the month of December 2021. However, markets rebounded sharply to end higher, taking support from data showing that GST collection in January crossed Rs 1.38 lakh crore in January, a growth of 15 per cent over the year-ago period.  Some support also came with data showing that the growth of eight core infrastructure industries grew 3.8 percent in December 2021 as against 0.4 percent contraction in same month last year, on better show by coal, cement and refinery products. Finally, the BSE Sensex rose 848.40 points or 1.46% to 58,862.57 and the CNX Nifty was up by 237.00 points or 1.37% to 17,576.85.