It appears bulls are here to stay, as analysts are positive on a 'growth-oriented' Budget. Global stock markets are also conducive for the bull momentum to continue on Wednesday as well. The expenditure theme has attracted market participants, who have lauded the populist-free Budget despite crucial Assembly elections being round the corner.
The Union Budget was presented amid high expectations, said Motilal Oswal Financial. "Although the Economic Survey forecasted 9.2 per cent real GDP growth in FY22, followed by 8-8.5 per cent growth in FY23, the markets were anticipating that the government would announce measures to support weak consumption. Instead, the government continued on its course to improve the quality of its expenditure by focusing on investment growth," it added.
SGX Nifty 17,720 indicates another 100-point gap-up opening for Nifty, as Nifty February futures on Tuesday closed at 17,589. Overnight, the US stocks closed in the green, while most Asian stocks are ruling positive in early deals on Wednesday.
‘Borrowing cost to rise’
Most analysts believe the market will remain resilient with intermittent corrections going forward. However, they fear the Capex plan may trigger higher borrowing costs.
The higher-than-expected fiscal deficit, and thus, borrowings, disappointed the bond market and pushed the benchmark bond yield to over 6.8 per cent, said Motilal Oswal.
Tanvee Gupta Jain, Economist, UBS Securities, noted the budget focused on providing continued strong support for public capex (railways, roads & highways, defence, amongst others) with an intention of crowding in private capex. This is likely to get a further boost considering ₹1 lakh crore has been offered as an interest-free loan (for 50 years) to states (over and above the normal borrowings) to increase productive capital spending.
"We think this growth-oriented budget may have been announced at the cost of higher market interest rates considering a sharp increase in government borrowings to fund this plan,” she added.
FPIs may return: Analysts
Analysts expect foreign portfolio invetors to return to the Indian markets soon. After selling over Rs 33,000 crore in January alone, they sold just about Rs 30 crore worth shares. Experts believe their selling will soon slowdown and they will resort to aggressive buying once the Fed actually raises interest rate from March.
Divam Sharma, Founder, Green Portfolio, (SEBI-registered PMS Provider), said the Budget is a huge positive for the markets as there were no negative surprises and is going to ensure continuity of attractiveness of the Indian economy for the FPI investors.
Ruchit Jain, Lead Research,5Paisa.com said, "Our markets witnessed a fair bit of volatility post the Budget speech but given that it was a big event, such moves were on expected lines."
The follow-up move post the initial reaction was very important and we witnessed a V-shaped recovery from the lows, which indicates buying interest amongst market participants on dips, he said and added: "Thus, the trend for the market continues to be positive and until and reversal signs are seen, we continue with our optimistic view on the markets."
Nagaraj Shetti, Technical Research Analyst, HDFC Securities, said: "The short-term trend of Nifty continues to be positive, with high volatility. The upside momentum seems to have strengthened in the last few sessions and this could be continued in the coming sessions. The next upside levels to be watched are around 17800-17900 levels in the near term. Immediate support is placed at 17460 levels.