Markets eke out modest gains ahead of Budget, U.S. Fed’s rate decision

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Equity benchmarks ended with marginal gains on January 31 as investors kept their powder dry ahead of the Union Budget presentation and the U.S. Federal Reserve’s interest rate decision.

Fag-end buying helped the 30-share BSE benchmark Sensex settle with a gain of 49.49 points or 0.08% at 59,549.90. During the day, it hit a high of 59,787.63 and a low of 59,104.59.

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The broader NSE Nifty inched up 13.20 points or 0.07% to close at 17,662.15.

Mahindra & Mahindra topped the Sensex gainers’ chart with a jump of 3.53%, followed by UltraTech Cement, Power Grid, SBI, ITC, Tata Motors, Titan and NTPC.

On the other hand, Tata Consultancy Services, Bajaj Finance, Tech Mahindra, Sun Pharma, Asian Paints, HCL Tech and HDFC were among the major laggards.

“The Indian market has been underperforming compared to the rest of the world because it has been trading at premium valuations, which are in contrast to the moderation forecast in the domestic economy for FY24.

“The premiumisation has tapered, currently trading in line with developed markets like the US; however, we continue to trade at a premium to other emerging markets. The Adani saga has prolonged the correction as FII selling has increased. Now the focus is on the outcome of the Budget and Fed policy, on which the market has a mixed view,” said Vinod Nair, head of research at Geojit Financial Services.

The pre-Budget Economic Survey, tabled in Parliament on Tuesday, said India’s economic growth is projected to slow to 6 – 6.8% in the next fiscal, from an estimated 7% in FY23, but the country will remain the fastest-growing major economy in the world as it fared better in dealing with the extraordinary set of challenges the globe has faced.

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While it indicated that inflation may not be too worrisome, borrowing costs are likely to remain “higher for longer” as an entrenched inflation may prolong the tightening cycle.

India’s recovery from the pandemic was relatively quick, growth to be supported by solid domestic demand, pick up in capital investment, the Survey said but highlighted the challenge to the rupee with the likelihood of further interest rate hikes by the U.S. Fed.

Current account deficit or CAD may continue to widen as global commodity prices remain elevated. If CAD widens further, the rupee may come under depreciation pressure, it said, adding the overall external situation will remain manageable.

“Now all eyes are on the Union Budget and we expect volatility to remain high on Wednesday. The last two days of pause in the index indicate a breather after the breakdown but the overall tone is still bearish,” said Ajit Mishra, vice president of technical research, Religare Broking Ltd.

In the broader markets, the BSE midcap and smallcap indices climbed as much as 2.21%.

World markets were on the backfoot ahead of the U.S. Federal Reserve’s monetary policy decision. Investors widely expect the Fed to raise rates by 25 basis points to rein in inflation.

Elsewhere in Asia, equity markets in Seoul, Tokyo, Shanghai and Hong Kong ended lower.

Equities in Europe were trading in the red during mid-session deals. Markets in the U.S. ended in the negative territory on Monday.

International oil benchmark Brent crude declined 1.18% to $83.90 per barrel.

The rupee depreciated by 41 paise to close at 81.93 (provisional) against the US dollar on Tuesday after the Economic Survey 2022-23 said the domestic unit may remain under pressure on account of plateauing of exports and subsequent widening of current account deficit.

Foreign Institutional Investors (FIIs) offloaded shares worth a net ₹6,792.80 crore on Monday, according to exchange data.