Stock Market Move Intuited The Budget Reforms

The Indian stock markets opened with a gap-up but experienced intra-day buying and short selling and ultimately closed flat. Amongst all NSE India stocks, SBIN and LT traded with a positive bias and that M&M, ONGC and TCS closed on a negative note. Amongst the BSE India & NSE India Sectors; Banking, Energy, Infra, Metal and Realty were positive, other all ended flat. The second day opened-lower and thereby traded positive for the entire trading session to close higher by 1.3%. All NSE stocks performed well except for Wipro, which closed lower. Realty, Metal and Energy sectors dragged Nifty upwards. The third trading day i.e. on the Railway budget day, the stock markets opened with a gap-up, experienced optimism in the initial half but was pushed down by the bad news of hiking passenger fares by the Railway Minister Dinesh Trivedi, which later also forced him to resign from the post. The Nifty seemed to have resisted at 5500 and as a result opened higher on Thursday and experienced uninterrupted selling to close lower by 1.5%. Only HUL and Wipro traded again the Nifty. Realty, Banking, Infra, Finance and Media were responsible for the fall. The last trading was the Union Budget 2012 day and thus the stock markets experienced volatility for the entire day. Ultimately the Nifty closed lower by 1.2% with not so good budget reforms. Only ITC, M&M and Ambuja played safe and sector-wise only Auto sector performed better.

The four days of the week were the pre-budget and last day was the budget day. All the economic policy issues like RBI rate hikes, Inflation, GDP growth, Disinvestment and fiscal deficit were dependent on budget reforms. This year Government could achieve only up to 15-16k out of the 40k fiscal deficit target. Pranav Mukherjee has already set the Deficit targets for the next two years and will plan the reforms accordingly. The main concern is to achieve a balance between growth and inflation. But FM says that the growth, Inflation and Deficit should not be linked. The inflation is said to reduce to 6.5% by month-end and up to 6% later. Overall speaking, The Government has decided to raise deficit amount through disinvestments, the subsidies have been cut down to 2% of GDP, Increased service tax by 2%.

In the Bullion market, gold traded positive due to drop in the prices. The physical demand for gold in India is high and thereby is forced to import gold in large quantities. Accordingly in the budget the import duty has been raised from 2 to 4% on the value to be imported.

What Next…..
Now the next immediate support for the Nifty would be 5240 and 5170 further will act as a strong support for Nifty as it has given a 200 day EMA support at these levels. The Nifty is expected to fill the gap downwards before any further upward rally. Moreover, the 3&8 EMA are about to give negative crossover on daily charts. For medium-term, the next likely support is at 5170 levels. However, If the negative effect of the budget is short-term then we can expect Nifty to rise up to 5480 in the first place and 5500 later.