A disappointing budget may push the market down again
We had mentioned in last week closing report that Nifty, Sensex will struggle to head higher. The week began with a positive close on Monday. However, following three trading session, the indices closed much lower. On Friday, there was mild recovery thanks to strong market rallies in US, Asia and Europe. Over the week, the Sensex lost 555points, while Nifty declined by 181 points.
A rally in Asia, Europe and US premarket futures supported a rise in Indian equity markets on Monday. The week began with anticipation about the two crucial Indian budgets to be tabled by the ministers overseeing the finance and railways portfolios. We mentioned that Nifty rally may reverse if it closes below 7,150.
On Tuesday, the index closed below the 7150 level and suffered a sharp correction bringing to pause the four days of weak upmove. Investors' confidence was eroded by the continuing conflict between the ruling NDA (National Democratic Alliance) and the opposition, which is seen as having a bearing on some key economic legislations that await parliamentary approval. The government was expected to push through major economic legislations like bankruptcy code and Goods and Services Tax (GST) Bill during the ongoing Budget session.
On Wednesday, Indian stock markets suffered a further correction of more than 1.30%-1.50%. The key indices of the Indian equity markets opened on a negative note in sync with their Asian peers and Tuesday's lower close at the US indices. Caution, just a day ahead of the railway budget and F&O (futures and options) expiry, dragged the equity markets lower. Market sentiments were also affected by the softening of crude oil prices, which declined by 1.72% to $31.33, and negative global markets, deterred investors from chasing stock prices higher.
On Thursday market was lukewarm to the rail budget. Nifty was pulled lower in the noon session to hit a six-day low. Investors' sentiments were subdued after the railway minister failed to announce big ticket capital expenditure projects in his budget speech, so as to meet the government's fiscal deficit targets. Further, investors took notice of the fact that railway revenue targets might not be met due to a slowdown in economic activity and that the government looked at monetising the internal resources for fund mobilization. On Friday Nifty the market opened 1% higher following rallies in all global markets but gave. It gave up some gains in the morning but after noon shot higher to end the day 0.85% higher.
The Economic Survey 2015-16 tabled in Parliament by Finance Minister Arun Jaitley on Friday forecast a GDP growth for 2016-17 in the 7% to 7.75% range. The Economic Survey 2015-16 claims that the country's macro-economy is stable, founded on the government's commitment to fiscal consolidation and low inflation. Major public investment has been undertaken to strengthen the country's infrastructure, claims the survey. The survey has expressed concern over approval of GST Bill being elusive so far and the disinvestment programme falling short of targets. It also states that corporate and bank balance sheets remain stressed affecting the prospects for reviving private investments. The survey cautions that if the world economy remains weak, India's growth will face considerable headwinds.