Finance Minister Nirmala Sitharaman is expected to unveil plans to boost economic growth when she presents the Budget 2021 on Monday. In the past six days ahead of the Budget, Indian markets saw a huge selloff amid volatile global equities and profit-taking ahead of the big event. Analysts say that Indian equities are expected to remain volatile this week as the Union Budget, macro data and RBI policy would be keenly watched by investors.
The Economic Survey 2020-21 was tabled in the Lok Sabha on Friday. The Survey projected that India’s economy is likely to grow by 11% in the fiscal year beginning April 1 as a vaccine drive and rebound in consumer demand help it emerge from the carnage inflicted by a strict coronavirus lockdown.
Also, RBI interest rate decision on Friday is another major event that would drive domestic market sentiments. Auto companies would also remain in focus amid monthly sales data announcement on Monday. In the last week, the 30-share BSE benchmark tumbled 2,592.77 points or 5.30% due to profit-booking ahead of the Union Budget.
Global trends will also be monitored besides investment trend of foreign portfolio investors (FPIs). On Friday, Sensex fell 588 points to settle at 46,285 while Nifty ended 1.3% lower at 13,634.
India should experience a “normal” June-September monsoon season as the effects of the La Nina weather pattern ease, according to a report by Skymet Weather Services Pvt, released today.
Dalal Street week ahead: Here is what analysts say
Nagaraj Shetti, Technical Research Analyst, HDFC Securities
“The historical study of past Union Budgets of the last 7-8 years indicate strengthening of either trend (up or downtrend) post the event. Having moved up sharply in the last few months, further weakness from here can’t be ruled out after the budget. The short term trend of Nifty continues to be weak. The negation of upside bounce attempt and the downside break of weekly support could signal more declines ahead for the Nifty. The key economic event of Union Budget could play vital role to show the direction for the market. Any rise from here could encounter resistance around 13750-13800 levels. The near term downside targets to be watched for Nifty around 13050 (20 week EMA) for the next few weeks.”
Ajit Mishra, VP – Research, Religare Broking Ltd
“The economic survey failed to trigger the rebound in the markets and now all eyes would be on the Union Budget scheduled on Monday i.e. Feb 1. We believe that the budget would focus on reviving growth and any disappointment on that front would lead to further correction in the markets. We reiterate our view to prefer hedged bets before the event unfolds and avoid jumping into a trade until the market stabilises.”
Nirali Shah, Senior Research Analyst, Samco Securities
“The coming week could witness the Budget fever running high as it keeps markets on its toes. With all the speculation such as a one lakh crore rupee national bank for infrastructure financing doing the rounds, there is a lot of presumption and assumption. Ultimately the question remains – will the government contribute more towards infrastructure spending and do long term capex in order to revive the slouching growth or will it just create noise around growth by simply tweaking fiscal policies? Markets will be extremely disheartened if the government chooses the latter. But if the former is chosen, markets may climb near its previous highs. Investors are suggested to cherry pick fundamentally sound companies at lower levels and not decide basis one day of volatility or craziness. Nifty50 closed the week at 13634.6, down by 5.13%.”
Vinod Nair, Head of Research at Geojit Financial Services
“The market traded negative, during the week, due to continuous FII selling under a weakening global trend. Both FII’s and domestic investors sold ahead of the key union budget. Global sentiment turned fragile as further lockdown delayed economy recovery and speculative activities in the US market. The Economic Survey indicated a V-shaped recovery in India and pegged real GDP to grow at 11% in FY22.
Union budget will be the key to add strength in the domestic market to perform better compared to the rest of the world. The risk is that expectations are high that the government will find a balance between populism, reform and growth under a weak fiscal position. Auto stocks can remain in focus as investors will keep an eye on sales in the month of January post a strong December. The global market will be watchful on any regulatory actions which may be taken given the recent speculation issue, doubting the efficient working of the market system”
Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities
“Buying is advisable if Nifty drops to 13500 with a final stop loss at 13200 levels. The focus should be specifically on financials, pharmaceuticals and commercial vehicles.”
Joseph Thomas, Head of Research, Emkay Wealth Management
“Negative indications from the overseas markets abound, mainly against the background of the spread of the pandemic, and stricter lockdowns in larger parts of Europe has not gone well with the market’s perceptions about the future of the economic rebound. The domestic market is awaiting the Union Budget on Monday, and it is quite likely that some positions have been pared ahead of the event. Speculations about likely public sector bank recapitalization based on the observations in the Economic Survey, helped PSU banks to hold well while the broader market was gradually declining during the day. The Economic Survey presents an optimistic picture of the economy, which has recovered from the economic distress caused by the pandemic and is poised to register positive growth numbers as we move into the new financial year. The fiscal, as well as monetary measures, are likely to be normalized over a period of over the next couple years as the sustenance growth is the key objective that needs to be pursued.”