ALL EARS ON LTCG, FISCAL DEFICIT AND CORPORATE TAX
While S & P 500 ended flat, Dow and Nasdaq gained 0.3% and 0.1% respectively, digesting Fed statement.
Fed left rates unchanged, but said it expects inflation to move up this year and to stabilize around its 2% target. Treasury yields rose with the 10-year yield hitting 2.75% after the statement.
Data from ADP and Moody's analytics showed private companies added 234000 jobs in January, much higher than expected 185000 figure. Weekly jobless claims held near their lowest levels in about 40 years.
Boeing, Eli Lilly and Anthem reported quarterly earnings that beat market estimates.
Earlier, in his State of the Union address, President Trump touched upon topics such as immigration, bipartisan cooperation, infrastructure and the economy.
In Europe, CAC gained 0.2% but DAX and FTSE fell 0.1% and 0.7% respectively.
Earlier data from China showed January factory activity expanded less than expected.
For the month, Dow, S & P 500 and Nasdaq gained 5.6%, 5.8% and 7.3% respectively.
After falling more than half a percent, benchmark indices recouped more than half of the losses in late noon trade to end just modestly lower. Sensex settled at 35965, down 69 points while Nifty lost 22 points to finish at 11028. BSE mid-cap and small-cap indices underperformed yet again, falling 1.3% and 0.8% respectively. BSE Healthcare index tumbled 1.6%, becoming top loser among the sectoral indices, followed by 1.25% lower Metal and FMCG indices.
FIIs net sold stocks, index futures and stock futures worth Rs 137 cr, 83 cr and 752 cr respectively. DIIs were net buyers to the tune of Rs 1295 cr.
Rupee appreciated 2 paise to end at 63.58/$.
ICICI Bank posted a 32% y-o-y dip in net profit at Rs 1650 cr. Gross NPA ratio improved marginally to 7.82% from 7.87% q-o-q. Net NPA ratio fell to 4.20% from 4.43%. New additions to NPA declined to its lowest in nine quarters at Rs 4380 cr.
Today morning, Hang Seng and Shanghai are trading with modest gains while Nikkei is up more than a percent. SGX Nifty is suggesting about 30 points lower start for our market.
Finance Minister Arun Jaitley will present his final budget before the 2019 Union Election. Three most important things from the stock market perspective to watch out would be fiscal deficit, Long term capital Gains and Corporate tax.
As on now, gains made on equities held for one year or more is tax free. There is fear that the threshold might be increased to two or three years or the long-term capital gains tax might be introduced. If any of these happen, expect a knee jerk negative reaction from equity markets.
In case of fiscal deficit, markets would be ok with a figure of 3.2-3.4% for FY19. Anything above 3.4% would be taken negative.
The 2015 Union Budget, which was the first full budget of the present government, proposed cutting basic rate of corporate tax to 25% from current 30% over the next four years, accompanied by fewer exemptions. But the same has been brought down only for smaller companies having turnover of upto Rs 50 cr. It remains to be watched whether FM reduces the corporate tax rate for bigger companies in this budget.
Coming to allocation part, this budget is largely expected to be agri, rural and infra focused. Also, some relief in the personal income tax front is expected.
After Nifty broke the immediate support of 11040 we had given downside target of 10950. Nifty, after touching a low of 10979, recoverd to close at 11027 and is set to open higher today. 11171, the top made on Monday, is the immediate hurdle to eye, upon sustained crossover of which 11300 and 11360 would be next upside targets to eye. 10950 continues to be immediate support below which 10800 would be the next support to eye.