Markets cautious ahead of Budget speech

Thu, 10 Jul 09:30 am

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Today will be the first big policy day for Modi Government as Finance Minister Mr. Arun Jaitley presents his maiden Union Budget at 11 AM. Some of the pre budget announcements - Economic Survey and Railway Budget failed to impress the markets. With huge expectations from the new Government, this could be a make or break event for the markets. We believe investors should not base their investing on knee jerk reactions and focus on fundamentals and valuations.

The key areas to watch out will be if Budget can meet expectations with regards to revival in the investment cycle, inflation easing, fiscal consolidation, boost manufacturing, labour reforms, tax reforms, growth in the agricultural output. The list is long indeed, and the Budget is likely to signal policy changes and lay a road map to reforms in the long term. Overall, we will get an idea if the Government can walk the talk on India's economic revival.

Barring Japan (down 0.3%), the major Asian stock markets have opened on a positive note with stock markets in Taiwan (up 0.7%) and Indonesia (up 2.1%) leading the gains.

The Indian share markets have opened the day on a flat note. The sectoral indices have opened mixed with the stocks in FMCG and healthcare space leading the losses. However, stocks in the metals and capital goods space were witnessing buying interest.

The Sensex today is up by around 13 points (0.1%), while the NSE-Nifty is up by around 1 point. The BSE Mid Cap stocks have opened on a flat note while smallcap stocks have opened in the red with BSE Small Cap index down by around 0.3%. The rupee is currently trading at Rs 59.63 to the US dollar.

Telecom stocks have opened the day mainly in the red with ITI Ltd and AGC Networks Ltd leading the losses. However, Bharti Airtel Ltd and Idea Cellular Ltd have opened on a positive note. As per a leading financial daily, Bharti Airtel Ltd is planning to sell over a fifth of its telecom tower portfolio in Africa to Helios Towers Africa (HTA). The move is in line with its overall strategy to sell-off its 15,000 towers to a clutch of independent tower companies.The size of the 3,100-tower deal has not been disclosed. The proceeds from the sale will help Bharti Airtel to pare debt. Further, the pact will also reduce the company's ongoing capital expenditure on passive infrastructure and help it focus on its core telecom business and customers. As per the sources familiar with the matter, the overall deal for all the towers could be between US$2.5 bn to US$3 bn.

Auto stocks have opened the day mainly in the red with Mahindra &Mahindra Ltd and TVS Motors Ltd leading the losses. As per a leading financial daily, Ashok Leyland Ltd has stated that the funds worth Rs 6.7 bn (raised through Qualified Institutional Placement) will help it to reduce debt and support growth in the second half of the year when a revival of commercial industry is expected. It is important to note here that this is the highest amount ever raised by Ashok Leyland through an equity issue. A reduction in the debt will improve company's leverage ratios and lower interest costs.