FIIs, global cues to dictate trend in Indian market

Budget 2015/16 was a reasonable one but certainly not a big-bang reform-oriented budget. To the government's credit, it has not gone overboard on spending as it had to keep the fiscal deficit under control.

One reason the government couldn't go overboard even if it wanted to is that, unlike yesteryears, it now recognises the importance of foreign money flowing into the economy as the world is watching every government move across the globe and India is no different.

Although the government has allocated a huge sum for infrastructure sectors such as roads and railways, the budget was also an indication that the government doesn't have the tools to bolster the economy and it's on the mercy of the Reserve Bank of India (RBI) to revive growth. The government wants the RBI to cut rates and the central bank is not bowing to the demand of the government. The monetary policy committee is the first step to cut the RBI's power on overseas investment cap. It has to be seen how the government uses this tools in the days to come. This can be a double whammy if misused as it can put pressure on the Indian rupee and stability of the financial market and economy.

It would depend on the FII flows but one thing is sure that the Indian market is not a runaway market and it will consolidate from current levels. The Indian market is trading close to its historic higher range of price-to-earnings (P/E) multiple and in the past it has corrected by 15-20 per cent from this range. Similarly, no major negative will not see any major sell-off, but one has to tread cautiously.

Meanwhile, the market would focus on auto companies as they declare monthly sales numbers for February. It would also keep an eye on the HSBC India Manufacturing Purchasing Manager Index (PMI) that will be out on Monday and HSBC India Services PMI on Wednesday.

All eyes will be on the euro zone with the European Central Bank governing council meeting on Thursday, followed by its interest rate announcement. On the same day, the Bank of England will hold its monetary policy committee meeting. On Friday, the US will announce its non-farm payrolls for February.