White House ‘Trump’eter To Steer Global And Domestic Markets Ahead

Dalal Street seems to have rejoiced over Union Budget 2017 presented by Finance Minister Arun Jaitley as the BSE Sensex rallied close to 500 points on the back of a growth oriented budget. The market was especially delighted that the FM did not tinker with the long term capital gains (LTCG) tax as was anticipated by several market experts and participants.

Living up to the expectations, The FM tried ticking all the boxes by presenting an old-fashioned budget with government leading the capital expenditure by way of massive allocation of `1.87 lakh crore towards the rural economy, which has all the making of kick-starting the consumption related sectors that will ultimately reflect in the demand outlook of consumption driven companies.

The government was smart enough to not tinker with any of the sensitive issues such as capital gains tax and securities transaction tax which were in focus in the run-up to the pre-budget days as it was widely expected that taxes related to capital markets may be raised. On the sectoral front too, housing, rural, dairy, railways, among others, received a larger pie of the budgetary allocation which is a big positive for the economy as these are the important sectors generating employment in the economy.

One of the highlight was giving infrastructure status to affordable housing sector which will certainly have a positive ripple effect on various other sectors, along with reduction in corporate taxes for small and medium enterprises and personal taxation. 

Looking at the fund flow scenario, FIIs resumed buying in the domestic market, supported by domestic institutional money which continued pouring into our markets as FIIs and DIIs pumped in Rs. 2735 and Rs.1518 crore, respectively. Globally, the markets remained on tenterhooks post Donald Trump assuming the charge at Oval Office. Global financial markets have been topsy-turvy as the new US administration has accused several developed nations of manipulating currency As for the economic data, India’s manufacturing PMI increased to 50.4 in January from 49.6 in December as factory activity resumed pace. 

Auto sales for the month of January also indicated buoyancy, dispelling all the fears relating to the negative effect of demonetisation. Going ahead, all eyes would be glued to policy actions from the White House as in recent days there have been several actions which have impacted equity markets world over. Domestically, the Q3 earnings along with RBI’s sixth bimonthly policy statement slated for early next week would provide cues to the markets.