Dalal Street is expected to remain volatile on Tuesday as the Finance Minister Nirmala Sitharaman will table the first union budget of Modi 3.0 after the 2024 general elections. Indian headline indices, which have been hovering around its record highs, have seen some profit booking ahead of the D-day.
Investors will look out for signs of traction on the growth after the economic survey was presented on Monday. Bouts of volatility can be seen in the stock markets with a strong action in specific sectors and stocks. Besides the budget, geopolitical tensions, Joe Biden's withdrawal from the US presidency race and Q1 earnings will be key factors driving the Dalal Street sentiments.
Nifty opened gap down on account of global sell-off and weak results from heavyweights but soon recovered and traded sideways throughout the session. It finally ended mildly lower. Broader market recovered from last few days sell-off and gained about one per cent, said Siddhartha Khemka, Head - Retail Research at Motilal Oswal Financial Services
"The market is cautious ahead of the Union Budget, given the conservative growth forecast in the economic survey released during the day. Though the budget is largely expected to be growth-oriented, with the announcement of some measures aimed at addressing rural economy; this is largely factored in by the market," Khemka adds.
The budget presents a tough task for the Finance Minister. The ruling coalition needs to balance social obligations with fiscal discipline. Despite this, a balanced budget is expected. The recent RBI dividend provides additional room for social spending. Capital expenditure limit can be increased, said Subhash Chandra Aggarwal, Chairman and Managing Director at SMC Global Securities.
"The market anticipates growth and social spending, so no dramatic surge is anticipated. Fundamentals remain strong, suggesting a floor for the Nifty50. Specific sector performance will depend on budget allocations. Sectors like housing, cement, infrastructure, and IT should benefit from increased capital expenditure and boost to private investment," he said.
Technical Outlook India headline indices settled marginally lower on Monday. The Nifty50 index shed 21.65 points, or 0.09 per cent to settle at 24,509.25. The BSE Sensex ended at 80,502.08, falling 102.57 points or 0.13 per cent in the previous trading session. The BSE Midcap index rose 1.25 per cent, while the BSE Smallcap index was up 0.83 per cent for the day.
Markets ended with modest losses on Monday after the sharp fall on Friday. One needs to be cautious for the very near term until the Nifty can take out the immediate resistances of 24,595-24,646 in any pullback rally on Tuesday, said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.
"14-day RSI at 64.84 is, however falling and remains below its 9 day EMA. This indicates that momentum is weakening. While the Nifty continues to hold above the 20 and 50 day SMA ahead of the Budget to be announced tomorrow, the short term trend remains down. Further downsides are likely once the immediate support of 24362 is broken," he said.
A bearish outlook will prevail only if the Nifty sustains below 24,500 levels. Profit booking could lead to buyers exiting their positions, confirming the breakdown of the upward-sloping channel. The 24,500 level will serve as immediate support, with 24,620 acting as crucial resistance, said Dhupesh Dhameja, Technical Analyst at SAMCO Securities.
Commenting on Nifty Bank, Dhameja said that the index continues to struggle for direction, remaining trapped in a narrow range and extending its lacklustre performance from previous sessions. Despite recovering intraday losses in the first half, the index traded sideways. "It is sustaining above its 20-DEMA, which is acting as a crucial support level, on the daily charts," he said.
D-St demands from the FM The first full budget of the new government has a lot for Indian investors who have strong expectations running in forms of sops, PLI schemes, F&O trading scrutiny, rationalization of tax structure and relaxations for corporates, GST benefits, revision in income tax slabs and more being the key demands from the Finance Minister Nirmal Sitharaman.
The fiscal deficit target for FY25 is likely to stay at 5.1 per cent of GDP as per the interim budget, emphasis will be on job creation through capital expenditure, targeted social spending, and the 'Viksit Bharat' initiative. The budget may also outline a roadmap for fiscal consolidation beyond FY26, said Arvinder Singh Nanda, Senior Vice President at Master Capital Services.
"While no reduction in personal income tax rates is expected, there could be tax relief for middle-income taxpayers. Key sectors to watch include agriculture, start-ups, housing, railways, defence, electronics, and renewables. Changes in short-term capital gains tax rates are anticipated, but significant hikes in long-term capital gains tax rates are not expected," he said.
The Economic Survey has spotlighted a wake-up call for traders, particularly those new to the F&O market. It starkly highlights the urgent need for robust advisory services and comprehensive education in the trading community, said Parminder Varma, Whole-Time Director and Chief Business Officer at Sharekhan.