All eyes on Union Budget, to be key market driver next week

During this highly volatile week, the domestic market followed global reactions of Fed policy meeting, Russia-Ukraine tension and rising oil prices amid pre-budget jitters. Fed in its policy announcement, reaffirmed its plan on ending the bond purchase program and hinted on possible rate hike during the March session.

“All eyes are on the Union Budget now which is scheduled next week on February 1. We expect a growth-friendly budget but also expect the government to lay out a path for fiscal consolidation. Besides, earnings and global cues would remain on participants’ radar. We reiterate our cautious view and suggest continuing with hedged positions,” said Ajit Mishra, VP – Research, Religare Broking.

Any moderation in the geopolitical situation will lead to bottom-fishing, according to experts.

In the domestic market, banking stocks, especially PSBs, showed resilience during the week due to favorable earnings. On the other hand, shares of new-age technology companies took a hit during the week due to a drop in growth of profitability amid expensive valuations.

“The domestic trend will be muted in the short-term considering the budget and state elections outcome. In the coming week, the release of PMI data for January will be another key domestic data point that the investors should watch. During this period of high volatility, systematic investment methods should be a better strategy to be followed by investors,” said Vinod Nair, Head of Research at Geojit Financial Services.

Foreign investors continued to pull out money from markets. They have so far net sold Rs 28,243 crore worth of Indian equities, as per data available on NSDL. This is the fourth straight month that has seen FPI selling.

An analysis shows FPIs have been booking profits in IT where they have been sitting on big profits after the huge appreciation in the last two years. FPI selling has depressed the stock prices of financials, particularly that of leading banks.

“This is an opportunity for retail investors to buy into this performing segment. From the FPI perspective, the market is expecting budget proposals to include India in the global debt indices. A post-Budget rally triggered by some positive proposals can turn the market around prompting FPIs to turn buyers,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.