Bulls to regain further strength in the early part of the session on crucial Budget day. As usual, volatility will continue as the Finance Minister, Nirmala SItharaman is all set to unveil the Budget 2022-23 at 11 am in Parliament.
Experts said the swing will be more at micro level, as stocks will react to sector-specific announcements.
SGX Nifty at 17,510, indicates a 150-point gap up opening for NIfty futures, which on Monday closed at 17,362. Tracking a strong rally in the US stocks overnight, equities across Asia Pacific region too opened on firm note on Tuesday.
Notwithstanding today's volatility, analysts expect the market to turn bullish over the long-term as they see a lot of positives from Economic Survey.
Indranil Pan, Chief Economist - YES Bank, said: The Economic Survey painted India in an optimistic light with good macro-stability indicators touted as a buffer against the uncertain global environment. The response of the policy makers to Covid-19 has been mostly in the form of supply-side measures rather than a Keynesian demand push. A flexible policy approach has enabled steady the ship and also provide India with a bounce pad to emerge back on a strong footing."
Analysts expect a lot of dole-outs in the Budget in the form of tax concessions, especially to salaried class and other marginalised section. Some even believe an outside chance for a tax cut for corporates too, given the buoyancy in tax collection.
A stronger bounce to private investments is envisaged with healthier balance sheets – both for corporates and banks, Indranil Pan further added.
Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd, said: "The market will closely watch the developments during the Budget session and react accordingly. Nifty has managed to hold above its key level of 17,000 mark for last few days. Markets are likely to remain volatile and 17,000 would be a key level to continue the bullishness. Some of the sectors that would remain in focus ahead of the Budget are capital goods, infrastructure, housing, real estate, PSU banks etc."
Will Budget tinker in STT?
This time around there is a big expectation from Brokerages on the Budget especially on securities transaction tax (STT), stamp duty, long-term capital gains tax and GST.
Parth Nyati, Founder, Tradingo, said: "I believe STT should be removed or at least reduced because initially it was introduced in the place of long-term capital gain tax but now, we have both LTCG and STT that is not fair for the Indian Investors."
The transaction cost in India is too high and LTCG and STT are seen as a sentiment dampener for the market, resulting in very few traders turning a profit. Stock market penetration is increasing in India and it is anticipated that the government will take policy measures to ensure that the Indian market becomes more investment-friendly in comparison to other emerging markets and reducing LTCG and STT could be a good step in that direction."
Gift on the cards for IFSC?
Analysts also expect (IFSC) in Gujarat's GIFT City may get a boost from the Budget.
Shabarish Seshadrinathan, Vice President, Basiz Fund Service Private Limited, said: “Since the inauguration of International Financial Services Centre (IFSC) in Gujarat’s GIFT City, many actions at policy, regulatory and operational levels have enabled India’s IFSC ambition take shape and earn attention from far and wide. IFSC has the potential to become an investment gateway for India.“
“Apart from providing a global financial platform, it also provides an easy access to the fast-growing Indian economy to global investors. A key expectation from the Union Budget of 2022, is to align IFSC to global standards on continuing interest in Alternative Investment Funds. This can be done by extending relief from continuing interest for domestic sponsors and managers to make it a level playing field,” he added.
The Budget could provide an opportunity for the government to outline its long term economic priorities. Sentiments were also upbeat with a survey by industry body Ficci showing a sharp improvement in manufacturing outlook in Q3 (October-December 2021-22) after some revival in the first half of 2021-22, said Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi Shares & Stock Brokers.