Union Budget 2016: Is there further downside to the market as D-day approaches?

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New Delhi | Updated: February 26, 2016 2:14:42 PM

The last budget was presented by Finance Minister Arun Jaitley on February 28, 2015. Since then, the 30-share index BSE Sensex slid 5,951 points to 23,410.18 on Feb 23 from 29,361.50 on Feb 28 last year.

bse sensex, nse nifty, budget 2016The last budget was presented by Finance Minister Arun Jaitley on February 28, 2015. Since then, the 30-share index BSE Sensex slid 5,951 points to 23,410.18 on Feb 23 from 29,361.50 on Feb 28 last year.

A sliding equity market is looking eagerly for direction as the National Democratic Alliance (NDA) government prepares to present the second full-fledged Union Budget 2016 on February 29. Equity investors will be hoping for some positive announcements that could give fillip to domestic markets which have already slid 20 per cent since the previous budget.

The last budget was presented by Finance Minister Arun Jaitley on February 28, 2015. Since then, the 30-share index BSE Sensex slid 5,951 points to 23,410.18 on Feb 23 from 29,361.50 on Feb 28 last year.

Stocks fell for the third time in last seven sessions on Thursday. The 30-share index shed 813 points in the past three trading sessions following lack of clarity on fiscal consolidation ahead of the Budget. Fund managers remained anxious as they seek clarity on government measures towards fiscal discipline.

Siddhartha Khemka, head, research, Centrum Wealth, said, “The Budget day event is likely to be poor and can lead to further cuts in the coming sessions.”

Moody’s Investors Service on Tuesday said India’s fiscal metrics will remain weaker than its peers in the near term even if Finance Minister Arun Jaitley was to stick to fiscal consolidation roadmap. Jaitley in his Budget for 2016-17 will on Monday reveal if the credit-positive five-year trend of narrowing budget deficits – from 6.5 per cent of GDP in fiscal 2010 to 4.1 per cent in 2014-15 – will continue.

The Budget session of the Parliament began on Wednesday. The Railway Budget which was presented on Thursday failed to enthused market sentiments. The Union Budget will be unveiled by Finance Minister Arun Jaitley on Monday.

According to market experts, the bottom of the market will depend on the global development like outlook towards US rate hike, stabilisation in oil prices and the Chinese economy. However, this year’s Union Budget will not be a game changer for Indian equity markets, they feel.

Corporate earnings have continued to remain sluggish and have failed to enthuse investors. Post the last hike in US interest rate in December 2015, some market experts expected 4 more increases during 2016. But now due to turmoil in the global financial market the outlook is changing towards 2 to 3 times hike in US rate which is positive.

The data indicates that the markets may either move up or go down on the the budget day as well as post budget. Out of the previous 10 Budgets sessions, the BSE Sensex gave negative return on 5 occasions on the budget day as well as one month after the budget.

reuturn in percentage budget

On expectations from the Budget 2016, Vinod Nair, head fundamental research, Geojit BNP Paribas Financial Services, said, “Well the expectation is low given the setback in reform due to the political standoff. Government’s fist is also tight given the fiscal responsibility further added by the global slowdown. We expect this budget to be positive for consumption oriented sectors like staple, durable and non durable. Additionally, implementation of 7th pay commission will support such sectors. Infrastructure and railway infrastructure stocks may also benefit provided an increase in government spending.”

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