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Budget is by far the most important event of this week, in which the government is expected to make announcements that may give further boost of the economy. The Economic Survey will also be released during the week.
A number of key quarterly results will also keep the trading terminals busy. The US Federal Reserve meeting and updates on coronavirus will also be closely monitored.
Here are the key factors in details that will drive the market this week
After a week full of banking and financial companies publishing their quarterly earnings, the next week also see a number of top firms coming out with their numbers. Dr Reddy’s Labs, HDFC, IndiGo and United Spirits will announce their numbers on Monday. Tuesday will see carmaker Maruti Suzuki present its Q3 results. Bajaj twins, Pidilite and Jubilant Foodworks will follow on Wednesday, while Bharat Electronics, Bajaj Auto, Indian Oil, Marico and Bharti Infratel will release their numbers on Thursday. SBI, ITC, Power Grid, HUL and Tech Mahindra are scheduled to publish their earnings on Friday.
Arguably the most important event of the week and the year, Finance Minister Nirmala Sitharaman will present Budget on Saturday, February 1. The focus is likely to be on restarting the engines of economic growth, which have touched multi-year lows. Among the key expectations are rationalisation of Dividend Distribution Tax, income tax, revision in tax rates for foreign companies and firms/LLPs, and changes in custom duty rates.
On the other hand, since a lot has already been announced since the last full budget to this, some analysts are seeing it to be a non-event.
By and large, a large part of the reforms have been already done, said V Srivatsa, EVP & Fund Manager-Equities at UTI MF.
“Budget over a period has been losing its relevance… it is not that if nothing is done in the Budget you will not have something coming up in the next two, three months as we saw in September when the finance minister announced a cut in the corporate tax rates,” Srivatsa added.
Traders will keenly watch the fiscal deficit target that the government sets for the next financial year. Analysts expect it to breach the target for the current year set at 3.3 per cent of the GDP, as tax collections have not been up to the mark amid a slowdown in the economy.
Market to open on Saturday
Traders will have one extra session to make money this week as the country’s leading exchanges NSE and BSE said they would open for trading on February 1, Saturday, on account of Budget 2020.
This will be a repeat of 2015, when then Finance Minister Arun Jaitley presented the Budget on Saturday, February 28. Stock exchanges were open for trading then too.
Economic Survey, which details what went right and what went wrong in the passing year for the economy, is due next week. The book, usually prepared by the office of the chief economic advisor, may give us clues into the nitty gritties behind the flagging economic growth. It may also help in charting the direction for further reforms and guide the government.
January futures & options contracts will expire on Thursday, January 30. During the current series, Nifty has been largely flat, edging just 122 points higher till now.
Experts advise to protect profits ahead of F&O expiry and upcoming Budget. “Nifty is likely to see a tentative start to trade in the coming week. The 12,410 and 12,460 levels will act as resistance while support will come in lower at 12,100 and 12,000 levels. In the event of any correction, trading range is expected to get broader than usual,” said Milan Vaishnav, Consulting Technical Analyst at Gemstone Equity Research & Advisory Services.
In the buildup to the Budget week, the volatility has surged in the market. The barometer of volatility in the market, India VIX, gained 10 per cent in the last week. It stood at 15.56 as of Friday. Traders will keep an eye on the metric, which if climbs further may make them wary.
Amid a colourful week filled with domestic events, the traders will also keep an eye on the situation in China which is braving the spread of a deadly virus. The epidemic has killed at least 56 people.
The spread of a deadly new virus is accelerating, Chinese President Xi Jinping warned, after holding a special government meeting on the Lunar New Year public holiday. China said on Saturday that it would suspend all tour groups and the sale of flight and hotel packages for its citizens headed overseas, starting on Monday.
The developments may further spook the market as investors may take flight to safely, which in turn will increase the demand for safe haven assets such as gold.
Asian markets close
A number of Asian markets will be closed on Monday as they observe the start of Chinese New Year. Markets in Singapore, Hong Kong, China, South Korea, Malaysia and Vietnam will be closed for trading. Australian markets will also observe holiday marking Australia Day. China and Vietnam will also observe holidays on Tuesday and Wednesday.
The US Federal Reserve’s FOMC will meet on January 28-29. Fed has already clarified that there will not be any rate changes, but traders will keep a watch on the commentary from its members. Federal Open Market Committee meeting may offer insight into areas that may become problematic as well as its thinking on the balance sheet. The US will also release its December quarter GDP data on Thursday.
The Bank of England will also hold its MPC meet during the next week.
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