Slow Week Marks Run-Up To Budget

This week, the bourses seem to have just replicated last week’s movement. The markets ended on a dull note as there were no fresh triggers. The Sensex and the Nifty ended flat in the red, declining by 0.78% and 0.63% respectively.

An important step that the government has taken is to cancel its Rs 12,000 crore market borrowing plan, which it was supposed to finalise on February 22, 2013. This step came after the government’s revised fiscal deficit target of 5.3 per cent for FY2013. According to media reports, the budgeted gross borrowing is estimated at Rs 5.69 lakh crore for FY13, of which the government has already borrowed an approximate amount of Rs 5.58 lakh crore till date. This makes for 98% of its initial estimate.

On the global front, the important event last week was the Federal Open Market Committee (FOMC) meeting. The FOMC bond purchases worth USD 85 billion per month have generated different opinions from the policymakers in the committee. The general view within it is to change the pace of bond purchases in response to economic growth. Some believe that the pace of bond buying must vary incrementally from meeting to meeting, as new information about the economy becomes available. A few policymakers opine that the ongoing evaluation of the effectiveness, costs and risks of asset purchases may lead the committee to gradually abate or end the bond purchases before any substantial improvement in the labour market is seen. Others believe that the asset purchases should continue until the labour market picks up.

Gold prices fell to nearly 3% in the bullion market this week on further selling by stockists and investors amid dull retail demand. The same is the case with silver, which declined by 4.99% during the last week.

Money inflows from the FIIs remained strong, with a total of Rs 42628 having come in so far in CY13. The DIIs continued to remain in the red this week, taking the total to -6428 as yet for CY13.

The next week is a big one, with the Union Budget for FY14 due to be announced on February 28. This is said to be one of the important budgets, as the Finance Minister has to strike a balance between the reforms process and political pragmatism in view of general elections in 2014. Needless to say, any reformist move will provide a much needed trigger that the markets need at the present juncture.