Moneycontrol Pro Panorama | Is market feeling the chill of Budget fine print?

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Indian equity markets seem to be suffering from a mild hangover, after frenetic celebrations over a growth-oriented Union Budget 2022-23. The 3-day rally tripped on Thursday as frontline stocks in infrastructure, fast-moving consumer goods and information technology shed some of this week's gains. Is this profit-booking by investors or is it because the fine print of the budget has dampened sentiment?

No doubt, hefty budgetary allocations for infrastructure projects, in order to crowd-in private sector capital expenditure (capex), is the focus of this Budget. Drawing up a masterplan to ensure inter-departmental coordination gets a thumbs-up. But then, lack of deft implementation has been a bane, leading to a shortfall in achieving stated targets. Then there are other concerns over the government’s borrowing plan coupled with the external risk of global central banks intending to tighten liquidity. Manas Chakravarty’s article states that the fiscal deficit budgeted for 2022-23 is comparable to the post-global financial crisis number. In fact, the continued rise in 10-year bond yields after the Budget, is perhaps a reaction to this.

Meanwhile, there is uncertainty on whether the demand spurt seen after the second COVID-19 wave will sustain over the longer term. In this backdrop, lack of any stimulus in the budget to push demand has been a big disappointment. January’s India Composite PMI for manufacturing and services slid to a six-month low.

This is not to say that all hope is lost for investors. One can draw solace from the decent ramp-up in revenue and profits of companies in the December quarter, especially when viewed in the context of high commodity prices. Some market analysts are convinced that India is likely to outperform its emerging market peers on gross domestic product and corporate earnings growth in the near term. Amish Shah, head of India Research, BofA Securities, in an interview explains why global funds’ India overweight stance may sustain in calendar year 2022. A weakening China economy may also tilt the scale in favour of Indian equities.

That said, markets could continue to be jittery as investors look for further cues from the crucial Monetary Policy Committee meeting of the Reserve Bank of India, scheduled next week. Will they side with growth or inflation is a question that could finally get some concrete answers.

Investing insights from our research team

HDFC’s solid loan growth in Q3 FY22 further bolsters its market positionAdani Ports & SEZ: Value emerging despite the earnings miss

Automakers start the year on a soft note

Indian Hotels Limited: Will it emerge stronger, post COVID-19?

Navin Fluorine: How good is the investment case with rising competition?

Sona BLW: In-line Q3 FY22, strong order book and EV key drivers

What else are we reading?

Economic Recovery Tracker | Consumption flags, employment improves

Budget 2022: Has the government changed its spending priorities?

Chart of the Day | Demand for work under MGNREGA in January higher than before COVID

For defence stocks, capex spends are slowly but steadily improving

Tech Mantra: The most digital Budget ever

Meta: Reality bites social media group’s metaverse vision (republished from the FT)

Budget 2022 | For real estate sector, no new taxes is good news

Learn: Crypto Learn: NFTs -- The beginner’s essential guide

Technical Picks: GMDC, VIP Industries, JB Chemicals and ITC(These are published every trading day before markets open and can be read on the app)
Vatsala Kamat
Moneycontrol Pro