ALL EYES ON “MODI BUDGET”

ALL EYES ON “MODI BUDGET”

WORLD MARKETS                             

US indices ended with cuts of 0.3%-0.5% amid lackluster data and oil gains.

A second reading of U.S. fourth-quarter GDP showed growth expanded at a 2.2% annualized pace, revised down from the 2.6% pace estimated last month. The Chicago Purchasing Managers Index came in at 45.8, the lowest since July 2009. Consumer sentiment came in at 95.4 for February, beating expectations but down from January's 98.1. Pending home sales were the highest in 18 months.

Nymex crude rose 3.3% to $49.76 a barrel, for the first monthly gain since June.

European markets, except a marginally lower FTSE, gained between 0.4%-0.8% ahead of the launch of the European Central Bank's quantitative easing program.

The ECB is set to launch its 60 billion euro a month money-printing program in March, with details of the scheme to be discussed at it planned meeting next week.

German lawmakers approved a four-month extension of Greece's bailout.

For the week, Dow ended marginally lower, S & P 500 lost 0.2% while Nasdaq gained 0.2%. European markets surged 2.3%-3.6% except a modest 0.5% rise in FTSE.

AT HOME

It turned out to be a fantastic Friday as Sensex and Nifty soared 1.6% and 1.8% respectively, registering the largest single day in more than a month. Sensex settled at 29220, up 473 points while Nifty climbed 161 points to finish at 8845. BSE mid-cap and small-cap indices gained 1.8% and 1.4% respectively. Except a 0.2% fall in BSE FMCG index, all other sectoral indices ended higher, with Realty and Capital Goods indices leading the tally, climbing 4.2% and 3.8% respectively.

The economic survey presented by the finance ministry yesterday, pegged FY16 GDP growth at 8.1%-8.5% and said there was scope for big bang reforms. It sees growth rate for the current fiscal at 7.4%.

The Survey said the government was committed to fiscal consolidation, and that the outlook for the domestic macroeconomic was optimistic. The Survey said a double digit growth trajectory was now a possibility, also because inflation was showing a declining trend.

In addition, the government should meet its medium term fiscal deficit target of 3% of GDP, the Survey said.

FIIs net bought stocks and stock futures worth Rs 1957 cr and 1128 cr respectively but net sold stock futures worth Rs 107 cr. DIIs were net sellers to the tune of Rs 492 cr.

Rupee depreciated 8 paise to end at 61.83/$.

OUTLOOK

All eyes today would be on Parliament today where Modi government is set to present its first full scale budget.

The government is likely to commit itself to fiscal deficit figure of 4.1% for FY15 and 3.6% for FY16. Gross market borrowing for FY16 is likely to be set at 6.23 lakh cr. Nominal GDP growth target for FY16 is seen at 13%. Another important figure to watch would be plan expenditure, which is expected to be around 6 lakh cr.

Market would also watch out for on GST rollout roadmap. Other announcement might include deferral of GAAR by 2-3 years, reduction or removal of MAT for infra sector, incentives for low cost housing and renewable energy, recapitalization of Public sector banks, relaxation in gold import duty and enhancement of deduction limit under section 80c. Markets are also expecting possibility of STT reduction.

Meanwhile SGX Nifty is suggesting about 70 point higher opening for our market.

After Nifty achieved our downside target of 34-DMA at 8670, we had advised profit booking in short positions. We had also mentioned that 8790 is the immediate hurdle on the hourly chart above which 8900, where the trendline adjoining recent tops on daily chart is placed, would be the crucial hurdle to eye, a breach of which would mark a breakout from a triangle formation and would project a big target of about 9400.

Nifty yesterday surged 161 points to end at 8845 and is set to open with an upward gap today which would easily take it to 8900 mark, achieving the target mentioned above and vindicating our view.

8900, as mentioned above, would be seen as a crucial hurdle and a close above that would eventually lead the benchmark to around 9400.

Meanwhile traders can hold on to trading longs with a stop loss of 8775.