ALL EYES ON UNION BUDGET

 

ALL EYES ON UNION BUDGET

 

WORLD MARKETS

 

US indices plunged 2% each on Friday after trial results from Johnson & Johnson’s coronavirus vaccine disappointed some investors and amid worries about the retail trading.

 

J&J said its one-dose vaccine demonstrated 66% effectiveness overall in protecting against Covid-19. The vaccine was 72% effective in the United States, 66% in Latin America and 57% in South Africa after four weeks.

 

Shares of GameStop jumped 67.9% after Robinhood said it would allow limited buying of the stock and other heavily shorted names after restricting access the day before. There are concerns that if GameStop continues to rise in such a volatile fashion, it may ripple through the financial markets, causing losses at brokers like Robinhood and forcing hedge funds who bet against the stock to sell other securities to raise cash. There are also fears that the GameStop mania is a sign of a larger bubble in the market and that its unraveling could also cause turbulence and hit retail investors hard.

 

Spot gold rose 0.6% to $1,851.01 an ounce.

 

European markets fell 1.7%-2.2%. European Medicines Agency approved the vaccine developed by British pharma giant AstraZeneca for emergency use in the EU. But the European Commission also on placed temporary controls on the export of coronavirus vaccines made inside the bloc, following a spat with AstraZeneca and wider supply issues. France's fourth-quarter GDP growth came in at -1.4% versus the -4% average consensus.

 

For the week, US indices dropped more than 3%, posting their worst week since October. European markets fell between 2.9%-4.3%. Asian markets saw cuts between 3.4%-5.3%

 

AT HOME

 

After rising a percent in the initial trade, benchmark indices nosedived more than 2% from the top of the day to end lower by 1.3% each, extending the losing streak to sixth consecutive day and closing at the lowest level in 5 weeks. Sensex settled at 46285, down 588 points while Nifty lost 183 points to finish at 13634. Nifty mid-cap and small-cap indices fell 0.4% and 0.6% respectively. BSE Auto and Telecom indices tumbled 3% each, becoming top losers among the sectoral indices while Bankex and Realty indices were the top gainers, up 0.7% and 0.4% respectively.

 

FIIs net sold stocks, index futures and stock futures worth Rs 5391 cr, 5 cr and 183 cr respectively. DIIs were net buyers to the tune of Rs 2443 cr.

 

Rupee appreciated 9 paise to end at 72.95/$.

 

For the week, Sensex and Nifty fell 5.3% and 5.1% respectively, registering their biggest weekly cut after the week ended 8th May, 2020. For the month, Nifty fell 2.5%, snapping 3-month winning streak.

 

GST collections for January rose to 1.2 lac cr, the highest monthly figure since the inception.

 

OUTLOOK

 

Today morning, Nikkei and Hang Seng are up 1% and 0.4% respectively while Shanghai is off 0.2%. SGX Nifty is suggesting a flattish start for our market.

 

Union Budget, to be presented today, is expected to give priority to supporting the economic recovery. Fiscal deficit for next fiscal can be pegged between around 4.8-5.5% and net borrowing number can be between 7.5-8.3 lac cr cr. Many of the key themes in the Budget will revolve around COVID-19, either directly on health issues (vaccines) or regulatory support to most affected sectors (such as hospitality, retail, aviation etc.). In addition, infrastructure, agriculture, the social sector and promotion of domestic manufacturing, alongside incentives to boost construction and housing, are likely to be in focus. There may be hike on import duties, which aside from raising more revenue also serves the government’s ‘Make in India’ drive.

 

Also, there are fears that to fund the above, there might be a hike in health & education cess, Change in STT and One-time billionaire tax.

 

Talking about levels, 13596, the bottom made Friday, also coincides with a trendline adjoining bottoms made in September and October 2020 and hence is the immediate support to eye. Below 13596, 13131, the bottom made on 21st December, would be the next support. If 13131 also gives way, 12962, the bottom made in December, which also coincides with 20-week moving average, would be the next level to eye.

 

On the way up, immediate hurdle on the hourly chart is placed around 14075, which also coincides with the 34-DMA. Above 14075, 20-DMA, placed around 14300, would be the next hurdle. Trading shorts can be held on to with the stop-loss of 14075.

 

Auto companies will report their January sales figures today.