Markets likely to make a good start; Budget announcements to give direction

The Indian markets went through a pre-budget rally in the last session, benchmarks recovering from the slump moved higher by about a percent on an optimistic view of the Economic Survey presented by the government. Today is the big day for markets, as its not only the expiry day of the F&O February series but the Union Budget will be presented by the Finance Minister P. Chidambaram. There are lots of expectations from the governments' last budget before going for election next year. While, every industry after putting their demand is waiting for some positive outcome from the budget, the finance minister is likely to spell out  plans to narrow fiscal and current account deficits as a major priority. Today, the start is likely to be in positive terrain on the back of sanguine global cues and positive outlook from the Economic Survey, which called for widening of tax base and prioritising expenditure to bridge fiscal deficit apart from pegging economic growth at 6.1-6.7 per cent in 2013-14 and estimating March 2013 inflation at 6.2-6.6 per cent. However, the major direction could be drawn once the finance minister starts the announcements of government's spending and fund-raising priorities for the coming year. Traders will be eyeing for any announcement regarding the STT and wealth tax.

The US markets extended their gains on Wednesday, supported by some upbeat economic data. Durable goods orders, excluding orders for transportation equipment rose more than expected, while there was a much bigger than expected increase in pending home sales. Most of the Asian markets have made a positive start taking cues from the US markets. Japanese market too was witnessing a good bounce back ahead of the nomination of the new Bank of Japan’s Governor and after a report showed a rise in industrial production.

Back home, boisterous benchmarks showcased an enthusiastic performance on Wednesday, snapping their four days losing streak after the Congress-led UPA government raised the growth projection for fiscal year 2013-14 and simultaneously lowered the Inflation target for Asia’s third-biggest economy. After a firm start markets entered into the red for a while but, encouraging Economic Survey of 2012-13 helped the frontline indices to finish the session around their highest levels. Sensex re-captured its crucial 19,150 mark while, Nifty ended tad shy of 5,800 level as investors took to hefty across the board buying. Sentiments got bolstered after Economic Survey 2012-13, presented by Finance Minister P. Chidambaram in the Lok Sabha, stated that India’s economy may grow at 6.1-6.7% for the year 2013-14. The survey suggested that revival of growth will help contain NPAs, but more attention will have to be paid to whether projects are adequately capitalized up front given the risks. Further, the economic survey sees FY14 fiscal deficit at 4.8% while the current account deficit was pegged at 4.6%. Supportive cues from Asian markets , too provided the much needed support to local markets. Asian counters mostly rose on Wednesday after US Federal Reserve head Ben Bernanke reaffirmed the central bank's huge monetary easing scheme, but a stronger yen sent Tokyo lower. Back home, sentiments got some boost from telecom stocks like Idea Cellular, Bharti Airtel and Reliance Communication, which extended their rally after the Ministry of Communications & Information Technology, postponed the auction of 1800 and 900 MHz spectrum as it didn’t get any applications from potential bidders by the time of close on the last date for receipt of applications i.e. on February 25, 2013. Meanwhile, construction shares edged higher after the Economic Survey 2012-13 presented by the Union Finance Minister, P. Chidambaram in the Lok Sabha, noted that the government has taken several initiatives to expedite highway projects under the National Highway Development Project (NHDP). Finally, the BSE Sensex gained 137.27 points or 0.72% to settle at 19152.41, while the CNX Nifty rose by 35.55 points or 0.62% to end at 5,796.90.