Market drops on caution ahead of Union Budget 2016-17
Key benchmark indices dropped in the week ended Friday, 26 February 2016, as investors maintained caution ahead of next week's Union Budget 2016-17. The Sensex regained psychological 23,000 level after falling below that mark during the week. The Nifty regained psychological 7,000 level after slipping below that mark during the week. The market fell in three out of five sessions of the week.
The barometer index, the S&P BSE Sensex, dropped 554.85 points or 2.34% to settle at 23,154.30, in the week ended 26 February 2016. The losses for the 50-unit Nifty 50 index were higher in percentage terms than those for the Sensex. The Nifty slipped 181 points or 2.51% to settle at 7,029.75.
The BSE Mid-Cap index lost 2.34%. The fall of this index in percentage terms was same compared with the Sensex's decline. The BSE Small-Cap index dropped 3.25%. The decline for this index was higher in percentage terms than the Sensex's decline.
With traders avoiding taking large bets ahead of the Union Budget 2016-17, key equity benchmark indices registered small gains on Monday, 22 February 2016. The Sensex rose 79.64 points or 0.34% to settle at 23,788.79, its highest closing level since 9 February 2016.
Losses for banking sector stocks and public sector companies led losses for key benchmark indices on Tuesday, 23 February 2016. The Sensex shed 378.61 points or 1.59% to settle at 23,410.18, its lowest closing level since 17 February 2016.
Caution ahead of Union Budget 2016-17 and negative cues from global markets pulled Indian stocks lower for the second straight trading session on Wednesday, 24 February 2016. The Sensex lost 321.25 points or 1.37% to settle at 23,088.93, its lowest closing level since 12 February 2016.
Banking stocks led losses for key benchmark indices on Thursday, 25 February 2016, as investors remained cautious ahead of the announcement of Budget. The Sensex fell 112.93 points or 0.49% to settle at 22,976, its lowest closing level since 11 February 2016.
Key benchmark indices edged higher on the last trading day of the week on Friday, 26 February 2016, on positive global stocks. The Sensex gained 178.30 points or 0.7% to settle at 23,154.30.
From the 30-share Sensex pack, 24 stocks fell and six rose.
Tata Steel declined 1.92%.
Coal India shed 0.38%. Substantial movement of coal takes places through the railways and there will be no change in existing freight rates on coal transport through railways, with the Railway Minister keeping freight rates unchanged in the Rail Budget 2016-17 announced on 25 February 2016.
Meanwhile, there is wide expectation of further increase in clean energy cess on coal in Union Budget 2016-17 as the government intends to encourage renewable energy generation. It may be recalled that in Union Budget 2015-16, the government had raised the clean energy cess on coal to Rs 200 per tonne from Rs 100 per tonne.
Bank stocks declined. HDFC Bank (down 2.85%), ICICI Bank (down 6.9%), Axis Bank (down 1.64%), and State Bank of India (SBI) (down 5.1%) dropped.
The key announcement to watch in the Union Budget 2016-17 is whether there is higher than proposed allocation of capital funds to public sector banks (PSU banks). A higher capital funds allocation would enable PSU banks to write off bad loans and meet with Basel III capital adequacy requirements. PSU banks continue to reel under a severe asset quality pressure, which worsened sharply in Q3 December 2015 after the Reserve Bank of India (RBI) advised banks to classify certain weak loan accounts as NPAs and make provision as a part of an Asset Quality Review (AQR) of the banking system.
Among pharma stocks, Sun Pharmaceutical Industries (up 0.85%) and Cipla (up 0.13%) gained. Dr Reddy's Laboratories declined 2.28%.
Auto stocks dropped. Tata Motors (down 4.82%), Mahindra & Mahindra (M&M) (down 0.09%), Maruti Suzuki India (down 4.8%), Bajaj Auto (down 8.96%), and Hero MotoCorp (down 5.36%) declined.
The commercial vehicles industry is seeking announcement in the Union Budget 2016-17 on scrappage policy that would provide incentive for replacing old commercial vehicles with new vehicles. This would be positive for commercial vehicles manufacturers, as it will result in spurt in demand for commercial vehicles.
IT stocks declined. TCS (down 4.55%) and Infosys (down 0.4%) dropped.
Wipro slipped 2.88%. The company announced after market hours on 25 February 2016, that it has collaborated with Wind River to showcase carrier grade cloud technologies.
For the IT sector, a key announcement to watch in Union Budget 2016-17 is whether the government restores the exemption from minimum alternate tax (MAT) on profit from exports for SEZ units. Due to removal of exemption from MAT for SEZ units in the 2011 Budget, the IT industry is struggling to utilize the MAT credit lying in balance sheet.
Bharat Heavy Electricals (Bhel) (down 6.67%), GAIL (India) (down 6.87%) and L&T (down 3.52%) were among the other losers from the Sensex pack.
Index heavyweight and cigarette major ITC dropped 4.54% on concerns that the government may hike tax on all tobacco products in the Union Budget 2016-17 by upto 40%. Reports suggested that tobacco products may again attract higher taxes in the upcoming Union Budget 2016-17 to be presented on Monday, 29 February 2016. Highlighting a discrepancy between the existing tobacco prices and rising income levels, the health ministry along with the World Health Organisation (WHO) and other public health groups have proposed a hike in taxes of up to 40% for all tobacco products, as per reports.
NTPC dropped 6.29% to Rs 121.35 after Government of India set the floor price for divestment of its stake in the state-run firm through the stock exchanges mechanism at a discount to the ruling market price. The offer for sale (OFS) for divestment of up to 5% Government of India (GoI) stake in the state-run firm received strong response from institutional investors. However, the OFS got poor response from retail investors.
Meanwhile, the Economic Survey 2015-16 tabled in Parliament by Finance Minister Arun Jaitley on Friday, 25 February 2016, set a wider range of 7% to 7.75% for projected GDP growth for 2016-17, with downside risks because of global economic slowdown. The annual document prepared by finance ministry's chief economic adviser Arvind Subramanian states that the country's macro-economy is stable, founded on the government's commitment to fiscal consolidation and low inflation. Major public investment has been undertaken to strengthen the country's infrastructure. The survey has expressed concern over approval of GST Bill being elusive so far and the disinvestment programme falling short of targets. The survey states that corporate and bank balance sheets remain stressed affecting the prospects for reviving private investments. The survey cautions that if the world economy remains weak, India's growth will face considerable headwinds.
The survey states that the fiscal deficit target of 3.9% of GDP for the year 2015-16 seems achievable. However, the coming year is expected to be a challenging one from the fiscal point of view as the implementation of the Pay Commission recommendations and the One Rank One Pay (OROP) scheme will put additional burden on expenditure. The survey states that the government should retain its previously stated 3.5% fiscal deficit target for 2016-17. At the same time, the survey states that the time is ripe for a review of the medium term fiscal framework. It states that a medium-term perspective to expenditure planning is necessary.
The survey states that due to the government's commitment to carry the reform process forward, conditions do exist for raising the economy's growth momentum to 8% or more in the next couple of years. The survey underlines that despite global headwinds and a truant monsoon, India registered 7.2% growth in 2014-15 and 7.6% in 2015-16, thus becoming the fastest growing major economy in the world.
Meanwhile, Railway Minister Suresh Prabhu kept freight rate and passenger fare unchanged in the Railway Budget for 2016-17 presented in the Lok Sabha on Thursday, 25 February 2015. The Railways will undertake a review of the existing freight tariff policy so as to evolve a competitive rate structure vis a vis other modes of transport. Prabhu also said that Indian Railways will increase the revenue through non-fare sources. The current revenue through non-fare sources is less than 5% and it will be increased to world average of 10% by next five years. Prabhu has proposed a plan size of Rs 1.21 lakh crore for the Railways for FY 2017. The focus is on enhanced capital expenditure with a mix of various sources of funding in order to ensure that the projects are given assured funding.
The Railways Minster announced three more dedicated freight corridors (DFCs) in the Budget. The Railways has proposed to increase the electrification budget of railways by 50% in FY 2017. The Railways will seek services of private parties in non-operational areas such as cleaning, facility management etc.
The barometer index, the S&P BSE Sensex, dropped 554.85 points or 2.34% to settle at 23,154.30, in the week ended 26 February 2016. The losses for the 50-unit Nifty 50 index were higher in percentage terms than those for the Sensex. The Nifty slipped 181 points or 2.51% to settle at 7,029.75.
The BSE Mid-Cap index lost 2.34%. The fall of this index in percentage terms was same compared with the Sensex's decline. The BSE Small-Cap index dropped 3.25%. The decline for this index was higher in percentage terms than the Sensex's decline.
With traders avoiding taking large bets ahead of the Union Budget 2016-17, key equity benchmark indices registered small gains on Monday, 22 February 2016. The Sensex rose 79.64 points or 0.34% to settle at 23,788.79, its highest closing level since 9 February 2016.
Losses for banking sector stocks and public sector companies led losses for key benchmark indices on Tuesday, 23 February 2016. The Sensex shed 378.61 points or 1.59% to settle at 23,410.18, its lowest closing level since 17 February 2016.
Caution ahead of Union Budget 2016-17 and negative cues from global markets pulled Indian stocks lower for the second straight trading session on Wednesday, 24 February 2016. The Sensex lost 321.25 points or 1.37% to settle at 23,088.93, its lowest closing level since 12 February 2016.
Banking stocks led losses for key benchmark indices on Thursday, 25 February 2016, as investors remained cautious ahead of the announcement of Budget. The Sensex fell 112.93 points or 0.49% to settle at 22,976, its lowest closing level since 11 February 2016.
Key benchmark indices edged higher on the last trading day of the week on Friday, 26 February 2016, on positive global stocks. The Sensex gained 178.30 points or 0.7% to settle at 23,154.30.
From the 30-share Sensex pack, 24 stocks fell and six rose.
Tata Steel declined 1.92%.
Coal India shed 0.38%. Substantial movement of coal takes places through the railways and there will be no change in existing freight rates on coal transport through railways, with the Railway Minister keeping freight rates unchanged in the Rail Budget 2016-17 announced on 25 February 2016.
Meanwhile, there is wide expectation of further increase in clean energy cess on coal in Union Budget 2016-17 as the government intends to encourage renewable energy generation. It may be recalled that in Union Budget 2015-16, the government had raised the clean energy cess on coal to Rs 200 per tonne from Rs 100 per tonne.
Bank stocks declined. HDFC Bank (down 2.85%), ICICI Bank (down 6.9%), Axis Bank (down 1.64%), and State Bank of India (SBI) (down 5.1%) dropped.
The key announcement to watch in the Union Budget 2016-17 is whether there is higher than proposed allocation of capital funds to public sector banks (PSU banks). A higher capital funds allocation would enable PSU banks to write off bad loans and meet with Basel III capital adequacy requirements. PSU banks continue to reel under a severe asset quality pressure, which worsened sharply in Q3 December 2015 after the Reserve Bank of India (RBI) advised banks to classify certain weak loan accounts as NPAs and make provision as a part of an Asset Quality Review (AQR) of the banking system.
Among pharma stocks, Sun Pharmaceutical Industries (up 0.85%) and Cipla (up 0.13%) gained. Dr Reddy's Laboratories declined 2.28%.
Auto stocks dropped. Tata Motors (down 4.82%), Mahindra & Mahindra (M&M) (down 0.09%), Maruti Suzuki India (down 4.8%), Bajaj Auto (down 8.96%), and Hero MotoCorp (down 5.36%) declined.
The commercial vehicles industry is seeking announcement in the Union Budget 2016-17 on scrappage policy that would provide incentive for replacing old commercial vehicles with new vehicles. This would be positive for commercial vehicles manufacturers, as it will result in spurt in demand for commercial vehicles.
IT stocks declined. TCS (down 4.55%) and Infosys (down 0.4%) dropped.
Wipro slipped 2.88%. The company announced after market hours on 25 February 2016, that it has collaborated with Wind River to showcase carrier grade cloud technologies.
For the IT sector, a key announcement to watch in Union Budget 2016-17 is whether the government restores the exemption from minimum alternate tax (MAT) on profit from exports for SEZ units. Due to removal of exemption from MAT for SEZ units in the 2011 Budget, the IT industry is struggling to utilize the MAT credit lying in balance sheet.
Bharat Heavy Electricals (Bhel) (down 6.67%), GAIL (India) (down 6.87%) and L&T (down 3.52%) were among the other losers from the Sensex pack.
Index heavyweight and cigarette major ITC dropped 4.54% on concerns that the government may hike tax on all tobacco products in the Union Budget 2016-17 by upto 40%. Reports suggested that tobacco products may again attract higher taxes in the upcoming Union Budget 2016-17 to be presented on Monday, 29 February 2016. Highlighting a discrepancy between the existing tobacco prices and rising income levels, the health ministry along with the World Health Organisation (WHO) and other public health groups have proposed a hike in taxes of up to 40% for all tobacco products, as per reports.
NTPC dropped 6.29% to Rs 121.35 after Government of India set the floor price for divestment of its stake in the state-run firm through the stock exchanges mechanism at a discount to the ruling market price. The offer for sale (OFS) for divestment of up to 5% Government of India (GoI) stake in the state-run firm received strong response from institutional investors. However, the OFS got poor response from retail investors.
Meanwhile, the Economic Survey 2015-16 tabled in Parliament by Finance Minister Arun Jaitley on Friday, 25 February 2016, set a wider range of 7% to 7.75% for projected GDP growth for 2016-17, with downside risks because of global economic slowdown. The annual document prepared by finance ministry's chief economic adviser Arvind Subramanian states that the country's macro-economy is stable, founded on the government's commitment to fiscal consolidation and low inflation. Major public investment has been undertaken to strengthen the country's infrastructure. The survey has expressed concern over approval of GST Bill being elusive so far and the disinvestment programme falling short of targets. The survey states that corporate and bank balance sheets remain stressed affecting the prospects for reviving private investments. The survey cautions that if the world economy remains weak, India's growth will face considerable headwinds.
The survey states that the fiscal deficit target of 3.9% of GDP for the year 2015-16 seems achievable. However, the coming year is expected to be a challenging one from the fiscal point of view as the implementation of the Pay Commission recommendations and the One Rank One Pay (OROP) scheme will put additional burden on expenditure. The survey states that the government should retain its previously stated 3.5% fiscal deficit target for 2016-17. At the same time, the survey states that the time is ripe for a review of the medium term fiscal framework. It states that a medium-term perspective to expenditure planning is necessary.
The survey states that due to the government's commitment to carry the reform process forward, conditions do exist for raising the economy's growth momentum to 8% or more in the next couple of years. The survey underlines that despite global headwinds and a truant monsoon, India registered 7.2% growth in 2014-15 and 7.6% in 2015-16, thus becoming the fastest growing major economy in the world.
Meanwhile, Railway Minister Suresh Prabhu kept freight rate and passenger fare unchanged in the Railway Budget for 2016-17 presented in the Lok Sabha on Thursday, 25 February 2015. The Railways will undertake a review of the existing freight tariff policy so as to evolve a competitive rate structure vis a vis other modes of transport. Prabhu also said that Indian Railways will increase the revenue through non-fare sources. The current revenue through non-fare sources is less than 5% and it will be increased to world average of 10% by next five years. Prabhu has proposed a plan size of Rs 1.21 lakh crore for the Railways for FY 2017. The focus is on enhanced capital expenditure with a mix of various sources of funding in order to ensure that the projects are given assured funding.
The Railways Minster announced three more dedicated freight corridors (DFCs) in the Budget. The Railways has proposed to increase the electrification budget of railways by 50% in FY 2017. The Railways will seek services of private parties in non-operational areas such as cleaning, facility management etc.
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