The market may remain volatile today ahead of expiry of February 2008 derivatives contracts. At the end of Wednesday (27 February 2008)s trading, Nifty saw a healty rollover of 69% to March 2008 contracts from February 2008 contracts.
Traders and institutions are unlikey to take large positions today ahead of the Union Budget 2008-09 due on Friday, 29 February 2008. The Finance Minister P Chidambaram would today table in Parliament, the Economic Survey - a report card on the economy during this fiscal that would also show the direction of government policy in the year ahead. It will be followed by the presentation of Union Budget 2008-09 on Friday, 29 February 2008.
The Survey, mainly authored by the Chief Economic Advisor Arvind Virmani, is expected to indicate the government's priorities and thrust areas for the Union Budget 2008-09. The Survey is expected to indicate policy measures to rein in inflation, which is ruling above the four per cent mark, measures to reverse slowdown in export growth, tackle the impact of rising rupee and address the issue of spurt in global crude oil and food prices.
The market registered small gains on Wednesday, 27 February 2008 as fall in IT and banking counters offset gains in capital goods and auto shares. Sensex rose 19.80 points or 0.11% at 17,825.99. A per provisional data, foreign institutional invstor (FIIs) purchased shares worth Rs 350.45 crore on Wednesday. Domestic funds bought shares worth Rs 341.35 crore on that day.
FIIs were net buyers of Rs 1,352.06 crore in the futures & options segment on Wednesday. They were net buyers of index futures to the tune of Rs 1,621.07 crore and bought index options worth Rs 30.42 crore. They were net sellers of stock futures to the tune of Rs 287.80 crore and sold stock options worth Rs 11.62 crore
With general elections due in 2009, Union Budget 2008-09 to be presented on 29 February 2008 will be the last full-fledged budget of the Congress-led United Progressive Alliance government and it is therefore likely to be a populist budget. Thus, the Finance Minister (FM) is likely to provide higher allocations to several social initiatives like rural upliftment, employment, education, agricultural growth and public health.
Though populist measures will dominate the budget, FM is also expected to take steps to stimulate investment and consumption demand at a time when the economy is witnessing moderation from a solid growth last year. A reduction in personal income tax, if any, will result in increase in disposable incomes which in turn may boost demand for consumer goods.
Expectations are that the corporate income tax rate may be cut or the 10% surcharge on corporate tax may be abolished. The surcharge is 10% on a tax rate of 30%, making the effective corporate tax rate 33%. Another possibility is that of a cut in dividend distribution tax from 15% to 12.5%.
Meanwhile, FM may raise the Securities Transaction Tax (STT) slightly. STT is currently at 0.125% on delivery trades. STT is 0.025% on non-delivery trades on sell transactions. STT is 0.017 % in futures & options segment on sell trasactions.
It is also expected that the FM would announce some relief packages for troubled export sensitive sectors like textiles, rubber, jewelry, leather and IT services. These sectors have been hit by rupees surge in the past one year.
Asian markets were mixed today. Key benchmark indices in Hong Kong, and South Korea were up by between 0.4% to 0.75%. Key benchmark indices in Japan, Singapore and China were down by between 0.3% to 1%. Financial markets in Taiwan are closed for a holiday.
US stocks were little changed on Wednesday after a rally fizzled when doubts emerged that lifting investment caps on the two largest home financing companies was enough to prevent deeper damage to the housing market. The Dow Jones industrial average was up 9.36 points, or 0.07%, at 12,694.28. The Standard & Poor's 500 Index was down 1.27 points, or 0.09%, at 1,380.02. The Nasdaq Composite Index was up 8.79 points, or 0.37%, at 2,353.78.
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