As traders weighed the possible impact of the Railway Budget, Economic Survey, G20 Finance Ministers’ meeting as well as the ensuing Union Budget, most of the previous week’s gains were wiped off. It also did not help that oil was also sliding, on reduced chances of the OPEC-non OPEC meet reaching a break through on cutting production as a means to prop up oil prices. Meanwhile, rupee which had been stable within the 68-68.5 region, weakened further against the US dollar, and was seen edging towards 69 by the end of week.
Incidentally, FIIs, who have been net sellers in Indian equities almost all of this month, were seen exiting from debt also, all through this week, possibly on doubts that the government may deviate from the fiscal target. The government is facing a conundrum with popular demand, from the voters especially, for more government spending, while the central bank or for that matter the FIIs may be more happy with commitment to meeting the fiscal targets.
While the rail budget lacked fireworks, it appears to be a grounded approach when put in the context of a struggling economy that has led to underachieving the railway ministry’s previous year’s targets. The focus on quality and the stress internal as well as external customers is certainly about planning for the future, while the efforts to monetise its own assets and to raise revenue through innovative ways is certainly better than blindly betting on economy doing good. More importantly, the railway budget did appear to be a cohesive part of the government efforts. The rail budget day, was however not very kind on all stocks connected to the sector. Some of the rail related stocks fell over 10 per cent, but such moves have always been characteristic to the sector.
The volatility that was visible through the week, however witnessed course correction as rail budget infused fresh ideas, and as derivative expiry dynamics helped to push sentiments to the back ground. The last working day of the week was energised by the release of Economic Survey, which also favoured meeting the 3.5% fiscal deficit target. While banks raced faster than the broader market on proposals for budgetary allocation of Rs 700 billion, possibility of commitment towards fiscal consolidation raised expectations of further central bank easing.
However, profit booking capped such gains, prompted by fears that the Union Budget may have few major announcements, as was the case with the Railway Budget.
Obviously, the week ahead has its eyes on the Union Budget, but it has been evident, at least from the last couple of Budget presentations that they have ceased to be the big-bang event for the stock market, and the markets know significant announcements have always tricked in through the year. But while India gets its domestic plans ready, it would also require calibration in line with global cues, especially, in the backdrop of concerns over the health of China, the world’s second largest economy, Oil prices, as well as the threat of the UK leaving the EU.