Nifty has bounced off long-term support and may head towards 7,700
We had mentioned in last week’s closing report that Nifty, Sensex were not yet out of the woods and that a disappointing budget may push the market down again. The budget has disappointed many investors and the Sensex and Nifty briefly touched their 52-week lows during Monday’s trading, when the budget was presented in Parliament by the Finance Minister. However, post-budget, the likely reforms in government policy and the possibility of an interest rate cut from the Reserve Bank of India (RBI), along with favourable cues from global market pushed the market indices higher for three days on Tuesday, Wednesday and Thursday. On Friday, the major indices were range-bound and closed marginally higher than Thursday’s close. The weekly trends in the major indices of the Indian stock markets are given in the table below:
Union Budget announcements, combined with negative Asian cues, and a dip in the rupee value depressed the Indian equity markets during Monday’s trading. During the Union Budget announcements, the Sensex plunged to a fresh 52-week low of 22,494.61. However, recovered somewhat but still closed negative. Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) touched a fresh 52-week low of 6,825.80 points.
The Union Budget 2016-17 was tabled in parliament on Monday. Finance Minister Arun Jaitley disclosed the government's spending on the rural sector, infrastructure and agricultural credit. Market analysts observed that many investors were disappointed, as they expected some out-of-box reform measures. The budget did provide some measures, as well as healthy fiscal deficit targets. Roads and infrastructure sector were supported. There were some big negatives like the hike in securities transaction tax and lower bank recapitalisation levels. Big positives include the hike in rural spending and infrastructure sector.
Expectations of a rate cut, coupled with budgetary announcements and positive Asian cues, buoyed the Indian equity markets on Tuesday. The BSE market breadth was heavily tilted in favour of bulls -- with 1,903 advances and 573 declines. Initially, the key indices of the Indian equity markets opened on a positive note, in-sync with their Asian peers and expectations of a future rate cut. Short-coverings were triggered by heightened chances of a future rate cut by the RBI. This pushed the prices higher, as investors expect the Union Budget's fiscal prudence measures will give room to the RBI to further ease its monetary policy. Presenting the Union Budget, Finance Minister Arun Jaitley on Monday announced that the government will adhere to a 3.9% fiscal deficit target. He also set a 3.5% target for the next fiscal. Buying in large caps like ITC, ICICI Bank, Hero MotoCorp and Maruti Suzuki lifted equity markets higher. Even positive macro-data that showed acceleration in India's manufacturing activity in February supported the equity markets upward movement.
The bull-run on Indian stock markets continued for the second straight day on Wednesday, with the mood also lifted by the strong showing in other Asian markets and overnight gains in the US and Europe. Analysts said the sentiments were also boosted by signs of a rate cut by the Reserve Bank of India (RBI), given that Finance Minister Arun Jaitley has decided to adhere to meeting the deficit target of 3.9% for this fiscal, and lowering it to 3.5% for the next year. Sector-wise, the S&P BSE realty index, bankex, finance index and basic materials index were the prominent gainers among indices.
On Thursday, the post-budget bull-run continued and the major indices of the Indian stock markets closed nearly 1.5% higher than Wednesday’s close, lifted by the perception that the national budget has some reforms push. Sector-wise, the S&P BSE metal index, capital goods index, industrials index and basic materials index were the prominent gainers among the BSE indices. Global cues from Tokyo and Singapore markets were also favourable. Shares of metal companies were in focus with the Nifty Metal index surging 4.81% on the NSE after LMEX, a gauge of six metals traded on the London Metal Exchange (LME), hit its nearly four-month high on Wednesday. Jindal Steel & Power Limited (JSPL), Vedanta, Tata Steel, Hindalco Industries and NMDC rallied more than 5% each. Steel Authority of India (SAIL), Jindal Saw, JSW Steel, National Aluminium Company (Nalco) and Bhushan Steel were up 2%-3% on the NSE.
On Friday, the major indices were range-bound due to insufficient momentum in the bull-run and finally closed marginally higher than Thursday’s close. Sector-wise, the S&P BSE metal index, power index and basic materials index gained on the BSE, while IT index was among the losing indices.