After the Reserve Bank of India’s policy meet and the Union Budget, stock markets would yet again focus on global cues for direction.
The outlook for equities in the coming week depends on whether there is enough risk appetite among foreign investors, given the liquidity unleashed by central banks across the world. Also, focus would be on the fourth-quarter earnings estimate of companies.
Key benchmark index Nifty of the National Stock Exchange (NSE) had closed at 5,317 after it fell 1.16 per cent last Friday, after the finance minister’s Budget Speech. The Sensex of the Bombay Stock Exchange (BSE) had closed at 17,486. Interest rate-sensitive realty and banking stocks had declined as RBI kept its policy interest rate, the repo, unchanged at 8.5 per cent in its mid-quarter monetary policy review on March 15.
On Friday, stocks in the US had closed on a flat note due to weaker-than-expected consumer-sentiment report. The Dow Jones Industrial Average fell 0.15 per cent. The S&P 500 rose 0.11 per cent, while the Nasdaq Composite slipped 0.04 per cent last Friday. In Europe, the FTSE was up 0.42 per cent, STOXX 50 gained 0.55 per cent and DAX rose 0.2 per cent on Friday. In Asia, the Nikkei was up 0.06 per cent and Hang Seng fell 0.2 per cent.
A note to clients from Mumbai-based brokerage house Prabhudas Lilladher said, “The continuing surge in global liquidity leading to strong risk-on trade in equities remains the sole factor driving the equities markets. This would limit any further downside and Nifty would continue to remain range-bound, between 5,200 and 5,700 levels.”
“Currently, the positive for the market even after the performance of the first quarter of this calendar year is that at 14.5x FY13, it remains relatively cheap. This is on current expectations of growth,” said Anand Tandon, chief executive officer at JRG Securities.
Also Read
Foreign institutional investors have pumped in $7 billion so far this year, and favourable liquidity conditions would see the flows continuing. The European central Bank has pumped in more than ^1 trillion into the system through long-term refinancing operations while the US Fed has pledged to keep policy accommodative well into 2014.
However, Tandon feels market up move could be affected by a slow down in China. “A slowdown in China, a serious possibility, can lead to lower commodity prices, and help Indian companies. On the flip, we may see earnings expectations get muted as taxes bite into consumers. If global flows were to reduce for any reason, the going can get tough,” he said.
In the Union Budget on Friday, Mukherjee increased service tax and excise duty to 12 per cent from 10 per cent, which will make cars, fridges, two-wheelers, ACs and washing machines costly. Investors were also unimpressed by the proposal to reduce Securities Transaction Tax (STT) by 20 per cent only on delivery based transactions. STT was expected to be removed totally. It is a tax introduced in 2004 and levied on the sale and purchase of equities. Finance minister pegged the GDP growth at 6.9 per cent for 12 months. The slowdown is mainly due to weakening industrial growth.