Markets trade flat as investors await Budget 2017

In the broader market, BSE Midcap and BSE Smallcap indices gained 0.3% and 0.2% respectively

Benchmark indices were trading flat during the early morning trade as investors awauted Union Budget, to be tabled later in the day. Arun Jaitley is likely to boost spending and ease back on cutting the deficit in his fourth budget, as he seeks to lift growth hit by the demonetisation drive.
 
At 10:51 am, the S&P BSE Sensex was trading at 27,675, up 19 points, while the broader Nifty50 was ruling at 8,564, up 4 points.
 
In the broader market, BSE Midcap and BSE Smallcap indices gained 0.21% and 0.24% respectively.

"Yesterday’s slippage saw buying interest from the 8,580 region on anticipated lines, but without enough signs of resumption of uptrend. To this end, early rise into the 8,600-8,640 region should attract long liquidation attempts yet again, though a sharp fall is less expected," said Geogit BNP Paribas in a note.

 
Economic Survey presented yesterday forecasted that FY17 growth could dip to as low as 6.5% before picking up in FY18 to between 6.75-7.5%. Arvind Subramanian, yesterday, advocated slashing personal income tax and accelerating cuts in corporate tax rates.
 
On Tuesday, foreign portfolio investors (FPIs) sold shares worth a net Rs 532.88 crore, while Domestic institutional investors (DIIs) bought shares worth a net Rs 237.37 crore, provisional data available with BSE showed.

Sectors and Stocks
 
IT index continued to fall on visa fears as H1B visa Bill to double minimum wages for H1B visa-holders was tabled in the US Congress. The development forced investors to sell IT stocks, dragging shares of  Infosys, HCL Technologies, Tech Mahindra and TCS down. The BSE IT index was fell over 1% during the early morning trade.

SBI, Adani Ports HDFC and Maruti were the top movers on BSE Sensex while Infosys, TCS, NTPC and Bharti Airtel were the top losers.

ONGC gained 1.7% after reporting 197% rise in net profit to Rs 4,352 crore in the December quarter of the current fiscal on the back of higher oil prices.  It's net profit was Rs 1,466 crore in the year-ago period.

Nifty PSU Banks gained over 2% led by PNB, Bank of Baroda, Union Bank of India and SBI on hopes of capital infusion in the budget.

Budget Expectations

Pegged as an ‘anti-rich’ budget by most analysts, Jaitley in his fourth budget is expected to cut personal as well as corporate tax rates and provide generous sops to revive the rural economy.

 
Government might tweak long term capital tax, raising the limit for capital gains tax relief to a minimum of three years from one year at present for equity funds. The changed definition would imply that investors will have to pay a 15% tax on the premium or gains made if the stock is sold within three years.
 
Investors also expect Jaitley to abolish Securities transaction tax (STT) on futures and options. STT, which may rise for the second consecutive year, from 0.05% for every 10 million trades, has been a major factor in killing the depth of capital markets as it repels high-frequency traders.

 
The infrastructure sector is expecting a 10-20% higher allocation in this Budget in the wake of the slowdown in the economy with projects aimed at improving roads & highways, shipping & ports and urban development
 
Fiscal deficit hits 94% of Budget target
 
Fiscal deficit in the first nine months of 2016-17 touched 93.9% of the Budget target as against 87.9% for the same period a year ago.
 
In value terms, the April-December fiscal deficit stood at Rs 5.01 lakh crore, or 93.9%, of 2016-17 Budget estimates (BE). The fiscal deficit stood at 87.9% in the corresponding nine months a year ago, as per 2015-16 BE.

 
Fiscal deficit, the gap between expenditure and revenue for the entire fiscal, has been pegged at Rs 5.33 lakh crore, or 3.5% of the GDP, for the financial year 2016-17.
 
Global Markets
 
The dollar was put on the defensive in Asia on Wednesday after the Trump administration accused Germany and Japan of devaluing their currencies to gain a trade advantage, fuelling a risk-off mood that also kept stocks subdued.
 
The US currency suffered its worst January in three decades after President Donald Trump complained that every "other country lives on devaluation."
 
The jump in the yen kept Tokyo stocks flat, while MSCI's broadest index of Asia-Pacific shares outside Japan was 0.06% lower.

 
Markets across Korea, Japan and Australia were trading higher in early trade on Wednesday, ahead of the outcome of the two-day policy review by the US Fed.
 
While the S&P 500 fell on Tuesday for a fourth consecutive session, it still ended higher for the month. The Dow dipped 0.54%, while the S&P 500 lost 0.09% and the Nasdaq 0.02%.
 
Chinese markets were still on holiday but surveys from the Asian giant showed manufacturing and services activity continued to expand in January.