Budgetary Expectations to Keep Equities Markets Volatile

Mumbai: The Indian equities markets are expected to be volatile as investors look forward to more policy reforms, sops and tax breaks from the Union Budget.

Besides, inflows of foreign funds and stock specific movement due to the ongoing earnings result season will be a major theme for the next week.

"Markets next week will have its entire focus on the Union Budget as the equities markets have already rallied ahead of it," Devendra Nevgi, Chief Executive of Zyfin Advisors, told IANS.

According to D.K. Aggarwal, Chairman and Managing Director, SMC Investments and Advisors, markets might continue their northward movement on the back of budgetary expectations.

"Nifty is expected to trade in the range of 8,450-8,800 levels; 8,450-8,500 would now be seen as a strong support zone," Aggarwal predicted.

Apart from the budget, the week ahead will be heavily influenced by the corporate earnings for the third quarter of FY 2017.

Companies like HDFC, Grasim, Tech Mahindra, Bajaj Auto, ICICI Bank and JSW Steel are expected to announce their quarterly results in the coming week.

"The earnings season so far has offered positive surprises, especially materials and some banks," Nevgi said.

"The demonetisation seem to have lower than expected negative outcome on earnings."

On Global level, investors will follow cues such as the US non-farm payroll figure which is expected on February 3rd, 2017.

The data assumes significance as it shows the economic health of the US and accordingly sets-up expectation for the next round of rate-hike cycle.

A hike in the US interest rates can potentially drive FPIs (Foreign Portfolio Investors) away from emerging markets such as India.

On technical-levels, the NSE Nifty could attempt to target the next resistance base of 8,678 points and 8,737 points.

"Crucial supports to watch for any emergence of weakness is at 8,610 points," Deepak Jasani, Head - Retail Research, HDFC Securities, told IANS.

"Markets could be volatile next week on the back of the Union Budget."

Furthermore, the Indian rupee is likely to range between Rs 67.90 and Rs 68.30 to a US dollar during the pre-budget period.

"In case of a sustained break of 67.90 -- rupee can test 67.30/40 levels. At the same time, a sustained break above 68.50 can cause a test of 68.90/69.00 levels on spot," Anindya Banerjee, Associate Vice President for Currency Derivatives with Kotak Securities, told IANS.

"After rupee, it is the turn of Indian bonds. Indian 10 year would be affected by what is presented in the Union Budget, especially number of gross fiscal deficit."

"A number closer to 3.5 per cent can be positive for yields but a number closer to 3.00 per cent would negative."

On a weekly basis, the Indian rupee had strengthened by 15 paise to 68.04 against a US dollar.

In addition, the pace of FIIs' (Foreign Institutional Investors) fund inflow into equity segment will be one of the crucial determining factors for the movement of key indices.

The provisional figures from the stock exchanges showed that the FIIs purchased stocks worth Rs 1,395.73 crore while domestic institutional investors bought scrip worth Rs 1,919.03 crore.

Last week, the key domestic indices zoomed by more than 3 per cent as resurgence of foreign funds and positive global cues enhanced the risk-taking appetite of investors.

The barometer 30-scrip Sensitive Index (Sensex) of the BSE augmented by 847.96 points or 3.14 per cent to 27,882.46 points.