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The market collapsed in the last three trading days due to oversold pressure, leaving investors with heavy, over-budget losses. Nifty closed at 21352 points last week and Sensex at 70700 points after falling to 21571 points in the previous week. The Indian budget, which will be presented next week a day after the US Federal Reserve’s decision, could lead to major fluctuations in the Indian market.
After HDFC Bank’s sell-off, selling by ICICI Bank and public sector banks pushed the Bank Nifty back to July levels last week. The Bank Nifty closed at 44866 points last week, falling below record highs of 48636 points and 44440 points.
Budget one
With elections looming, Union Finance Minister Nirmala Sitharaman’s presentation of the interim budget to be allocated from India’s accumulated fund for government needs in April-July in Parliament by Union Finance Minister Nirmala Sitharaman is crucial for the market. The market is hoping that the budget announcements ahead of the general elections will be used by the ruling party as an election promise and a guide for India’s future.
The 2009, 2014 and 2019 interim budgets also included standard deduction adjustments, tax relief and tax incentive announcements. This time too, new popular announcements like the Pradhan Mantri Kisan Samman Nidhi introduced by Piyush Goyal in the interim budget 2019 are expected. The fact that the elections are budget-busting could also be a concern in the “technically” Indian market. Investors should also be careful not to fall prey to Budget Day advances. Profit-taking is also likely after the budget announcements.
Fed decisions this week
The market, which strongly believes that the US Federal Reserve will not change the interest rate from 5.50% this time, is waiting for the signal that the Fed will start cutting the interest rate. Further influencing Fed decisions on Friday, US PCE data signaled that US inflation is under control, which is also positive for the market. While PCE data growth in the coming months remained below market expectations of 3%, the core PCE index was below last year’s figure.
World market next week
Beyond Wednesday’s Fed decisions, the Fed Chairman’s interest rate announcements will later determine the course of global markets. Also crucial for the US market are the non-farm payrolls, which will show January employment on Friday after the Fed decisions.
The Bank of England will announce interest rates on Thursday. GDP figures for France, Germany, Spain, Italy and the Eurozone due on Tuesday will influence European markets, followed by Asian markets. The Franco-German CPI numbers due on Wednesday and the Eurozone and Italy PMI data due on Thursday are crucial for the market. Manufacturing PMI data for European countries will be released on Thursday.
China Manufacturing PMI data due on Wednesday and Coxin Manufacturing PMI data due on Thursday will be important for both Asian and European markets. Important for the Asian markets are the retail sales and industrial production data from Japan and Korea due on Wednesday.
Stocks and sectors
∙ Possible relaxations in standard deduction etc. The possibility of people hoarding extra cash could benefit the real estate sector, car and bike companies and home appliance stocks.
∙ The market expects that the agricultural and rural sectors will again be at the forefront of the interim budget. Supplies of fertilizer, tractors and agricultural machinery are expected.
∙ The possibility of allocating more money in the budget for the development of Indian Railways this year is also a hope for railway stocks. In the 2019 interim budget, Rs 158 crore was allocated for railway development.
∙ The market expects the defense sector to gain significant importance in the interim budget and the subsequent general budget. In 2019, it is likely to go further with Rs 3 million earmarked for defence. However, it is expected that there will be further investments in the defense sector after the elections.
∙ Last time Rs 7.5 million was allocated for infrastructure development, the market is hoping that this time it will cross Rs 10 million. Infrastructure, cement, metal stocks and other utilities sectors are expected, but unless more funds are released, the sectors could become tired.
Electronics, electrical, AC, computer, laptop and mobile device manufacturers are expected to receive announcements in the Budget that will support their efforts to become a manufacturing hub. Watch stocks like Amber, Dixon, ITI etc.
∙ The prospect of introducing more economic stimulus programs in rural areas could benefit NBFCs and microfinance companies.
∙ Efforts are expected to be made in this Budget to provide greater support to Indian companies in the fintech sector.
∙ Apart from the support received in Ayodhya for the hotel industry, it is positive to expect more support in the budget. These include Indian Hotel, Lemon Tree Hotel, Kamat Hotel and Chalet Hotel.
∙ Tata has secured 400 rooms by 2027 with Indian Hotels’ agreement for a third hotel in Ayodhya.
∙ RBI’s approval for LIC to acquire 10% stake in HDFC Bank, which is being sold by foreign funds, is a boon for the Indian market. The existence of unsecured loans of HDFC Ltd, which resulted in lower interest income, also indicated a decline in the bank’s value.
∙ Fears that new SEBI guidelines on proving ownership of foreign funds could lead to sale of foreign funds are also weighing on the market. Foreign funds hold more ownership shares.
Results next week
Companies like Bharat Electronics, GAIL, BPCL, Petronet, Bajaj Finance, ITC, Marico, UTI AMC, LG Bros, Muthoot Finance, CSB Bank, Voltas etc. will declare their results tomorrow.
SBI, Maruti, Tata Motors, Adani Enterprises, L&T, Titan, Timex, Indian Hotel, Sun Pharma, Doctor Reddy, M&M Finance, Bajaj Finserv, Voltas, Bluestar, Apar, KPIT Tech, Emphasis, Dabur, Shree Cement, Pricol, Rights , Jupiter Wagons, Praj, Dhanalakshmi Bank, Geojit etc. are also announcing results next week.
crude oil
With the OPEC meeting scheduled for Thursday, Wednesday’s Fed Reserve meeting decisions and Chinese PMI data will weigh on crude oil prices. After the US, India is also in favor of crude oil by investing more money in oil reserves. Brent crude oil closed at $83 on Friday.
gold
The US dollar rose to its highest level in six weeks, preventing gold prices from rising. With the US Fed meeting next week, which could lead to more volatility in the dollar and bonds, this will also have an impact on international gold prices. The 10-year US bond yield remains at 4.13%.
initial public offering
The IPO of BLS e-Services, a subsidiary of BLS, begins on January 30 and ends on February 1. The IPO price of the company, which provides digital services to banks, is Rs 129-135.
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Disclaimer: Investing in the stock market is subject to risk of loss. The information contained in the article is prepared by the author based on the available indicators. Make your investment decision at your own risk
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