Markets Expect Stimulus From The Union Budget

Markets were tested to the limit this fortnight. The benchmark BSE Sensex gave up the coveted 40,000 level and traded down by 3 per cent, losing close to 1,200 points last fortnight. But what the numbers do not tell you is the story of resilience. As we go to the press, the markets have recovered on the back of global cues. Also, the expectations of triggers from the upcoming Union budget is keeping investors on the sidelines, thereby helping the bears

Tumultuous trading in the equity markets led to Sensex slipping down by 3.03 per cent, while Nifty dipped by 3.28 per cent during the fortnight. The downtrend was broad-based as mid-cap and small-cap stocks also found themselves in the grip of bears. The BSE Mid-cap index was down by 4.53 per cent and Small-cap index lost more ground and dipped by 5.53 per cent, during the fortnight. Sectorally, auto, banks and realty sectors experienced selling pressure due to concerns around defaults by NBFCs. Also, the action against some real estate builders caused the BSE Realty index to dip close to 7 per cent during the fortnight. The BSE Auto index lost by 5.70 per cent and Bankex lost 4.17 per cent, while BSE FMCG and Metal indices were down more than 2 per cent each.

With the US President Donald Trump attempting to mend his ways and trying to enter into a deal with China rather alienate it, the international markets headed towards the path of recovery on June 18 with major indices like Dow Jones and Nasdaq moving up by a per cent. The Nasdaq gained the most and was up by 8.47 per cent, followed by Dow Jones and S&P 500, which were up by 6.63 per cent and 6.31 per cent, respectively, during the fortnight. Similarly, the European indices were upbeat. The UK’s FTSE 100 was up by 3.59 per cent, while the German DAX and the French CAC 40 gained by 4.57 per cent and 5.12 per cent, respectively. The Asian markets also reacted positively following hopes of a revival of trade negotiations between the US and China. The Hang Seng gained by 2.25 per cent, while the Japanese Nikkei gained 2.75 per cent and the Shanghai Composite was flat, during the fortnight.

Trading by institutional investors was lacklustre during the fortnight, with low volume participation by both foreign institutional investors (FIIs) and domestic institutional investors (DIIs). Incidentally, both FIIs and DIIs were net buyers, albeit with low volumes. FIIs were net buyers to the tune of Rs. 1,010.55 crore, while DIIs were net buyers to the tune of Rs. 372.09 crore during the fortnight.



The optimism around the hope that the US and China will resolve their trade difference amicably and OPEC and Middle-East nations will find ways to diffuse the tension in the Strait of Hormuz has fuelled rallies in the global markets. The same is expected to help investor sentiments in the Indian equity markets. Also, as the industry forums and corporate India voice their concerns with the government during the pre-budget meeting, the market will look at Prime Minister Narendra Modi’s first budget in his second innings at the PMO as a major event. The markets are expected to remain in a wait-and-watch mode and take direction from the budget.