Will Sensex head northwards post the Budget?

Ever since the beginning of the year, Indian equity markets have been gripped by the Bears as devaluation of the Chinese currency in the beginning of the year rattled the markets. Meanwhile, interest rate hike by the US Federal Reserve, for first time in 9 years, further added to the investors’ anxiety.

The 30-share barometer, Sensex has fallen over 10 per cent from January 1 till Feb 17 and it has corrected by 20 per cent over the past one year.

The year has not gone as planned for the stock markets as heightened global economic uncertainty along with the diminished investor confidence triggered a substantial capital flight from the local equity markets. Overseas investors have pulled out around USD 2.3 billion from Indian equities till February 22, 2016.

In such a scenario, all eyes are set on the Union Budget 2016 announcements to be presented by Finance Minister Arun Jaitley on February 29 which would decide future movement of the Indian markets. 

What’s on the cards?

Budget 2016 is expected to include some deep-rooted structural economic reforms to bolster growth and incentivize investments that may help strengthen foreign and domestic investor sentiments.

Jaitley who will unveil the Budget on February 29, is expected to make key announcements with respect to the ‘Make in India’, ‘Digital India’, ‘Start up India’ and schemes such as the Pradhan Mantri Krishi Sinchai Yojana, etc. Goods and Services Tax (GST), Smart cities and Infrastructure reforms may also feature prominently in his budget speech. The Budget could definitely act as a roadmap to the Indian economy in the coming fiscal year.

Analysts expect markets to bounce back if the government presents an investor-friendly and growth-oriented Budget, as investors who are currently worried about the global market volatility, are likely to purchase stocks post the Budget.

Latin Manharlal Group

India’s economic recovery remains on firm footing.

At a time when its export-dependent emerging market peers are biting the dust, the Indian economy seems to be going from strength to strength, with Q3 GDP data signaling solid growth, a shot in the arm for the Modi government which is seeking to push through key structural reforms stuck in Parliament.

 At 7.3 per cent clocked in the October-December 2015 quarter, growth in Asia’s third biggest economy remains heads and shoulders above major global economies. While India, a net commodity importer, is benefiting from an ongoing crude oil price collapse, oil-driven economies such as Brazil and Russia are in steep recessions, and growth in China has hit a 25-year low of below 7 per cent.

The centre has pegged India’s economic growth rate for FY 2015-16 at 7.6 per cent, marking an acceleration from last fiscal’s 7.2 per cent expansion.

A quick glance at Q3 GDP figures shows that barring the farm sector which has been hit by a deficit rainfall for a second year running, most sectors of the economy are in good shape with manufacturing output surging 12.6 per cent and private consumption holding up quite well. Moreover, Gross Value Added, a proxy for economic strength rose 7.1 per cent in Q3 FY 2015-16, year on year.

Going ahead, a lot hinges on the government’s ability to stick to its fiscal deficit targets, the progress of which will be unveiled in the upcoming Union Budget. Solid news on the fiscal consolidation front could pave the way for further interest rate cuts. Further, getting over the GST hurdle is also a big test that the NDA government currently faces.  

Latin Manhralal