India VIX fell sharply by 8.18 percent to 15.72 on February 1 and corrected 11.14 percent last week that is giving some comfort to bulls but it needs to hold below 16 for Nifty to get a decisive range breakout above 10,985
What a day and a week for Indian markets. The Nifty50 not only reclaimed 10,700-10,850 but also closed just a shade below 10,900 on February 1. For the week, the index closed with gains of over 1 percent.
Markets reacted positively to the budget, as the headline fiscal deficit did not signal major slippage. Moreover, there are hopes that giveaways will aid both rural and urban consumption.
Despite the fiscal stimulus of close to Rs 1 lakh crore (works to 35-40 bps of GDP), the fiscal deficit slippage is projected to be limited at 3.4 percent of the gross domestic product (GDP) which is slightly higher than estimates of 3.3 percent.
“The bond market's reaction supports our concern over ambitious revenue assumptions and risk of further fiscal slippage. The budget may help consumption growth, but sustainable macro growth depends more on capex, so the deceleration in capex growth is worrying, especially as it could be cut even more if revenues disappoint,” UBS said in a report.
The Budget may raise the market's hopes that Prime Minister Narendra Modi will be re-elected, though the link between populist measures and election outcomes is not clearly evident historically, said the report. UBS maintains Nifty target of 10,000 in December 2019. It remains selectively overweight on consumer discretionary and neutral on autos.
For the week, the big talking point will be RBI policy meeting. Most experts are of the view that RBI could maintain status-quo in the February meet. The fiscal stimulus of close to 0.4 percent of the GDP is inflationary in nature and puts pressure on the bond yields.
This could adversely impact whole funded NBFCs and other financial services companies. This would prompt the central bank to go slow in terms of cutting interest rates in the near-term and rather maintain a pause on the interest rates, suggest experts.
The Indian rupee on February 1 weakened by 17 paise to close at 71.25 against the US dollar as concerns related to fiscal slippage weighed on the sentiment after the Interim Budget unveiled some big populist measures ahead of the general election.
On the institutional front, FPI were net buyers in Indian markets at Rs 1,315 crore on February 1 compared to DIIs who were net sellers to the tune of Rs 5.07 crore, according to provisional data.
On the earnings front, as many as 100 companies on the BSE will be declaring their result for the quarter ended December including Aban Offshore, Balrampur Chini, Exide Industries, Godrej Agrovet, IDBI Bank, Novartis India, Reliance Naval, SPARC, Welspun India, and Whirlpool India among others.
Exide Industries: PAT likely to grow 7 percent YoY to Rs 165 crore
Whirlpool India: PAT likely to grow 46 percent YoY to Rs 77 crore
Godrej Agrovet: PAT likely to grow 56 percent YoY to Rs 59.8 crore
(Estimates are from Motilal Oswal and Kotak Institutional Equities)
The index formed a bullish candle that also resembled ‘shooting star’ kind of pattern on the Interim Budget day.
This pattern is usually formed in an uptrend and is treated as a reversal pattern, but it would require confirmation before we can conclude that the trend will get reversed in near future.
If the index trades below 10,812 levels, unless it clears its critical resistance of 10,987 in next one or two sessions, then there will be higher probability of eventually Nifty slipping towards 10,600 kind of levels.
India VIX fell sharply by 8.18 percent to 15.72 on February 1 and corrected 11.14 percent last week that is giving some comfort to bulls but it needs to hold below 16 for Nifty to get a decisive range breakout above 10,985.
Three levels: 10813, 10983, 11000
Max Call OI: 11000, 11200
Max Put OI: 10700, 10400
Stocks in news:
Leading jewellery exporter Rajesh Exports on Friday reported a 4.78 percent rise in consolidated net profit at Rs 315.96 crore for the quarter ended December 31, 2018.
Tata Motors, one of country’s biggest automobile manufacturers, recorded 11 percent decline in passenger vehicle volume during January as liquidity crunch hit retail demand.
Travel services firm Thomas Cook India on February 1 reported a consolidated net profit of Rs 12.29 crore for the quarter ended December 31, 2018.
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