Indian equity indices are set to take cues from the Union Budget 2009-10 that will be presented on Monday. The Budget, to be presented by finance minister Pranab Mukherjee, will play a significant role in shaping the direction for the markets in the coming days, say analysts.

Last week, the domestic markets have rallied on the hope that some major steps will be taken by the government to boost the economy. The 30-share Sensex of Bombay Stock Exchange (BSE) gained 1.01%, last week, while S&P CNX Nifty of National Stock Exchange (NSE) rose by 1.11%.

On Friday, the last trading day of the previous week, Sensex added 254.56 points, or 1.74%, to close at 14,913.05 points, while Nifty was up 75.40 points, or 1.73%, to end at 4,424.25 points. However, the US market movement, which closed with huge losses last week, might have a negative impact on the Indian markets on Monday.

Some market players expect that the securities transaction tax (STT) will be lifted in the Budget, which will have positive impact on the domestic market.

An analyst from the leading broking house said, ?Markets expects a push on infrastructure projects, a plan for disinvestment, some reforms such as hiking foreign direct investment (FDI) limit for insurance and a clear road map to rein in the high fiscal deficit in the future.?

After the Budget, inflows from the foreign fund will be closely watched as, several foreign institutional investors (FIIs) are waiting to enter the markets, once the Budget is announced.

As per the data provided by the Bombay Stock Exchange, foreign institutional investors have been net buyers to the tune of Rs 643.65 crore in July, while domestic institutional investors (DIIs) are also net buyers at Rs 434.85 crore. In the year 2009, we have seen FII buying worth Rs 11,314.93 crore in the domestic markets.

?We have been witnessing huge short covering in the markets in the past few days. We hope that, after the Budget, we might see markets going up. Apart from that lot of depends on FII and the global cues which might impact the benchmark indices in the coming days,? said a dealer in the market.