Morning Cues: Will market recover from Budget setback?

Moneycontrol Bureau

Finance minister P Chidambaram could not recreate the dream budget of 1997. Apart from an unimpressive Budget, there was one more shock for the Indian economy -- GDP growth has slowed to a 15-quarter low of 4.5 percent in the October-December quarter lower than the 5.3 percent a quarter ago, and the 6 percent growth seen a year-ago.

Nifty ended below 5,700 on Thursday for the first time since November 2012 and the Sensex shed 290 points to close at 18,861.

Auto sales for the month of February are seen weak as retail demand is still slow. Car industry volumes expected to decline by 20% year on year. MHCV is expected to decline 30 percent. Meanwhile two-wheelers like Bajaj Auto may see a 7 percent year on year loss.

In the US markets, stocks reversed their earlier gains in the final minutes of trading to close lower. However major indices still finished higher for the month. The S&P 500 logged its fourth-straight month in positive territory.
 
On economic data front, US economy grew at a meager 0.1 percent in the fourth-quarter. The growth rate was the slowest since the first quarter of 2011.meanwhile weekly jobless claims dropped 22,000 to a seasonally adjusted 344,000.

In key data to watch out for in the US, ISM Manufacturing Index is expected to dip slightly to 52.8 for the month of February. Personal income is expected to contract by 2 percent and consumer spending could remain unchanged at 0.2%. Construction spending is seen at 0.6 %

The March 1 deadline for automatic spending cuts to set in. US president Obama will meet top congress leaders to discuss spending cuts.

The European markets closed in positive territory helped by upbeat earnings reports and ongoing support from the ECB and the US Federal Reserve to inject liquidity into markets.

Asian shares edged down with sentiment burdened by worries over the economic fallout from Italy's political stalemate, the likelihood of US "sequestration" spending cuts, and caution ahead of China's manufacturing data. Chinese official PMI for the month of February softened to 50.1 and Japan’s core consumer prices fell 0.2 percent in December from a year earlier.

In other asset classes, euro remains under pressure, it slipped to 1.30 to the dollar. The dollar index has inched towards the 82 mark.

In commodities, Brent crude prices slipped to USD 111 levels. Gold price is hovering around USD 1580 an ounce.