Markets to make a cautious start after analyzing the budget proposals

The Indian markets after a volatile day of trade ended higher in last session, traders were busy analyzing the budget proposals and rejoiced all the positive announcements for the manufacturing industry. Today, the start is likely to be a bit soft-to-cautious as the traders will now go with the fine prints of the budget and react accordingly. Most of the market participants have called the Interim Budget for 2014-15 a damp squib, which did not provide any major surprises either way, positive or negative. However, the auto sector is likely to remain buzzing with hopes of demand increase, as Finance Minister P Chidambaram has reduced excise duty on small cars and motorcycles, sport utility vehicles and mid and large-sized cars, quiet considerably. Though, the government is likely to lose Rs 1,000-1,200 crore over the next three and a half months due to reduction in excise duty on vehicles and consumer goods announced in the interim budget. FMCG stocks too may see some upmove, as the companies manufacturing soaps and detergents should get a slight respite on the cost front with the excise cut. There will be some buzz in the banking stocks, as they can continue to exclusively sell products of one insurance company as the Insurance Regulatory and Development Authority (IRDA) is renewing the corporate agency licences of banks having such tie-ups with insurers.

The US markets remained closed on Monday, unable to give any cues to the other global markets. The Asian markets have made a mixed start, though some of the indices are marginally in red but the Japanese market moved higher as the yen weakened before the Bank of Japan issues a policy statement, boosting the outlook for the nation's exporters. Though, the Chinese market is marginally in red as the nation is scheduled to report foreign direct investment figures today.

Back home, Indian markets witnessed a volatile day of trade, though the benchmarks apart from falling in red momentarily for once remained in range, but the benchmarks moved upwards in final hours after remaining directionless for most part of the trade. The much talked about interim budget was more or less on expected lines when the Finance Minister P Chidambaram giving a report card on the economy for the past two terms of the UPA government, went for some populist measures, however he kept the direct taxes unchanged but tweaked some excise duties to bring cheers to the long ailing manufacturing sector. Earlier, the markets got a cautious but positive start tailing the good global cues, the Asian markets surged, while the European markets made a good start and supported the local bourses in retaining their gains. Back home, the markets enlarging their last session gains ended higher on Monday, a day when UPA government’s second term's last budget was presented. Benchmarks that slumped to red, reacting initially to budget, started gaining strength and ended near the high points of the day, supported once again by the gain in blue chips. Meanwhile, in order to spur demand and boost investment in manufacturing sector the finance minister announced tax cuts for consumer durable industry and a sharp 4 percentage point cut in cars, motorcycles, scooters and telecom handsets. The finance minister also announced a cut of Rs 79,790 crore from the budgeted Plan expenditure of Rs 555,532 crore for the current financial year against the backdrop of a burgeoning fiscal deficit, pegging the fiscal deficit for the current fiscal at 4.6 per cent of gross domestic product (GDP) and at 4.1 per cent for 2014-15. There were some jitters in the market after the interim budget proposed to raise close to Rs 6,000 crore through Securities Transaction Tax (STT) in the next fiscal, however, the government lowered its STT target to Rs 5,497 crore from Rs 6,720 crore for the current fiscal. A majority of the market participants have been demanding removal or lowering of this tax. Also the super-rich tax was extended in 2014-15 as well. In the last Budget (2013-14 fiscal), the government imposed a 10 per cent surcharge for a year on people earning income above Rs 1 crore, covering 42,800 individuals and entities. However, with the budget announcements banking sector came into action, except the PSU banks as the FM announced a lower capital infusion to PSU banks of Rs 11200 crore in FY15. Auto stocks too gathered speed with announcements in Small Cars, Motorcycle, Scooters and Commercial Vehicles - from 12% to 8%, SUVs  from 30% to 24%, Large and Mid-segment Cars - from 27/24% to 24/20%. Though, the capital goods sector lost their steam despite the announcement of excise duty cuts, considering it too little too late. Finally, the BSE Sensex surged by 97.24 points or 0.48%, to settle at 20,464.06, while the CNX Nifty added 24.95 points or 0.41% to settle at 6,073.30.