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Markets likely to make negative start on Thursday
Feb-02-2023

Indian equity markets ended flat on Wednesday after Finance Minister Nirmala Sitharaman presented the Budget in the Lok Sabha. Today, markets are likely to make negative start, despite firm cues from global markets, amid Federal Reserve Chair Jerome Powell said policymakers expect to deliver a couple more interest-rate increases before putting their aggressive tightening campaign on hold. There may be some cautiousness as an analyst at Moody's Investors Service said that the Indian federal government’s aim to achieve a fiscal deficit target of 4.5% of gross domestic product (GDP) by 2025/26 could see some risks. The current pattern suggests that perhaps there could be some upward pressure on expenditure especially if they (government) continue with this focus on capex. Meanwhile, a private surveys report said that Manufacturing activity across the United States, Europe and Asia contracted again last month, underscoring the fragility of the global economic recovery, although factories in the euro zone at least may have passed the trough. However, some respite may come later in the day as Commerce and Industry Minister Piyush Goyal said a number of measures such as tweaks in customs duties on certain products announced in the Union Budget for 2023-24 will help boost the country's exports. He said that despite global economic uncertainties, India's goods and services exports together are registering nearly 14-15 per cent growth. Some support may also come in as the Centre for Monitoring Indian Economy’s (CMIE’s) data has showed that India's unemployment rate fell to 7.14% in January, the lowest in four months, from 8.30% in the previous month. It showed the urban unemployment rate declined to 8.55% in January from 10.09% in the previous month, while the rural unemployment rate slipped to 6.48% from 7.44%. There may be some buzz in banking sector related stocks as Finance Minister Nirmala Sitharaman proposed certain amendments to the Banking Regulation Act, the Banking Companies Act and the Reserve Bank of India Act to improve bank governance and enhance investors' protection. In her Budget speech, the finance minister said reforms in the financial sector and innovative use of technology have led to financial inclusion at scale, better and faster service delivery, ease of access to credit and participation in financial markets.

Asian markets were trading mostly in green in early deals on Thursday amid the United States Federal Reserve raised interest rates by 25 basis points and predicted the US economy will avoid a contraction this year. The US markets ended higher on Wednesday after the Federal Reserve raised interest rates by a quarter of a percentage point. The move was widely expected, and the Fed signaled that ongoing increases to short-term rates will be appropriate.

Back home,  Indian equity benchmarks ended volatile day on a mixed note on Wednesday as the euphoria about the Budget fizzled out, with investors going for profit-taking ahead of the Fed interest rate decision. Key gauges made a jubilant start and traded with positive bias in the first half of the session, as traders took some encouragement with Chief Economic Advisor (CEA) V Anantha Nageswaran’s statement that India has the potential to grow at 6.5-7 per cent and will become a $5 trillion economy by 2025-26 and $7 trillion by 2030 depending on exchange rate fluctuation. Sentiments remained up-beat as Federation of Indian Export Organisations (FIEO) said increasing exports to markets such as Brazil, South Africa and Saudi Arabia are boosting the growth of the country's outbound shipments.  Benchmarks extended their gains in afternoon session after Union Finance Minister Nirmala Sitharaman in her Budget speech in Parliament announced that the government proposes to increase capital expenditure outlay by 33 per cent to Rs 10 lakh crore in 2023-24, which would be 3.3 per cent of the GDP. Besides, Finance Minister tweaked the slabs to provide some relief to the middle class by announcing that no tax would be levied on annual income of up to Rs 7 lakh under the new tax regime. Some support came with the government data showing that production of eight infrastructure sectors rose at a three-month high of 7.4 per cent in December 2022 against 4.1 per cent in the same month of previous year on a better show by coal, fertiliser, steel, and electricity segments. Adding more optimism, the finance ministry said the GST collection in January surged to over Rs 1.55 lakh crore, the second highest-ever mop-up. Finally, the BSE Sensex rose 158.18 points or 0.27% to 59,708.08 and the CNX Nifty was down by 45.85 points or 0.26% to 17,616.30.
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