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Market Outlook : February

Outl k Going ahead, Indian equity markets will remain volatile as
budget failed to cheer Dalal Street on the imposition of long-
Monthly Market Roundup term capital gains (LTCG) tax of 10% on sale of equity shares.
The RBI’s monetary policy will be the major event this month.
Indian equity markets witnessed pre-budget rally in the The RBI’s monetary policy will be announced on February 7,
month of January on the expectations of a good and populist 2018. Further, US FOMC meeting minutes, BOE monetary
budget considering Lok Sabha elections in 2019. Adequate policy, Q3FY18 corporate earnings, macroeconomic data,
liquidity and expectations that the budget will boost the FIIs and DIIs trend, currency movement and crude oil price
rural economy and investment, without compromising on movement are the key factors to watch out for. We suggest
fiscal prudence aided the run-up in bull market. Market investors to invest in fundamentally sound companies with
participants were nervous ahead of budget especially on long term view.
long term capital gains (LTCG) front and fiscal consolidation
roadmap. Nifty Technical Outlook February
Finance Minister, Mr Arun Jaitley delivered rural centric
budget and gave major attention to agriculture. Government Nifty
outlined measures to boost agricultural production and the
rural economy, announcing new projects as well as enhanced On the monthly chart we have seen a rally of 766 points and
support for existing schemes to the tune of Rs 14.34 trillion. prices have formed strong bull candle but daily chart is not
Finance Minister has also announced a healthcare scheme to supporting bulls as well as RSI also not giving confidence for
cover 10 crore poor families, saying "50 crore beneficiaries further rally. So according to this two pattern combination
will get Rs 5 lakh per family per year." The scheme is the 11200 will be major resistance for Nifty, only above that we
world's largest government funded healthcare programme. can see momentum can continue up to 11398 – 11621 – 11882
Redrawing the consolidation roadmap for the third time in levels. However, if Nifty trades below 11009 then it is likely to
four years, Jaitley pegged the fiscal deficit for FY18 at 3.5% test 10657 – 10434 – 10173 levels.
of GDP and for FY19 at 3.3%. He had earlier projected fiscal Broadly, we are of the opinion that unless Nifty doesn’t cross
deficit for FY18 at 3.2% and FY19 at 3%. The fiscal deviation 11200 levels for current month there is a probability that we
in itself is not a major worry, as it has emanated, primarily can see some consolidation with some profit booking.
from the rollout of GST.
The middle-class, which hoped for a reduction in income Economic Data Wrap Up – January
tax ahead of an election year, were left disappointed as the
personal income tax rates remain unchanged. ¡ India's Dec Nikkei ¡ India’s Dec trade deficit
Indian equity markets suffered on the budget decision to manufacturing PMI rose to rose to $14.88 bln from
impose long-term capital gains (LTCG) tax of 10% on sale 54.7 from 52.6 in Nov. $10.55 bln YoY.
of equities will be applicable on gains exceeding Rs 1 lakh.
However, existing investors will be exempted from capital ¡ India’s Dec Nikkei services ¡ India’s Dec core sector
gains tax up to January 31, 2018. The budget also introduced PMI rose to 50.9 from 48.5 growth fell to 4% from
a 10% dividend distribution tax on dividend options of equity in Nov. 7.4% in Nov.
schemes to bring them on a par with the growth schemes.
US markets sell-off sparked by concerns of higher interest ¡ India’s Nov IIP growth rose ¡ India’s FY17 GDP
rates. The rout in US markets is also hitting markets around to 8.4% from 2% in Oct. growth at 7.1% from
the world. US Treasury bond yields hit a four year high. If 8.2% in FY16.
bond yields rise further, investors will move to sell out of ¡ India’s Dec CPI inflation rose
stocks and put money into assets like bonds which benefit to 5.21% from 4.88% in Nov. ¡ India’s Apr-Dec fiscal
from higher interest rates. deficit rose to Rs 6.20
The month finally ended with upward bias as S&P BSE ¡ India’s Dec WPI inflation trln vs Rs 5.01 trln YoY.
Sensex delivered positive returns of 5.60% to settle at 35965.02 fell to 3.58% from 3.93% in
and Nifty50 gained 4.72% ending the month at 11027.70. Nov.
On the institutional side, foreign institutional investors (FIIs)
bought Rs 13,781.50 crore worth of equities during the month
while domestic mutual fund houses continued their buying
spree with net purchases of Rs 7,386.40 crore in January 2018.

3 ARIHANT CAPITAL ¡ february 2018