Sensex and Nifty below crucial levels of 19000 and 5750 level - Eastern Financiers

An enthralling week it was!!! With the most impending events of the fiscal-the Union Budget 2014, the Economic Survey and the Railway Budget, reflected nervousness in the markets that culminated on a disappointing note marking loss of around two percentage point-dragging down the benchmark Sensex and Nifty below their crucial levels of 19000 and 5750 level.

However, Finance Ministry's clarification on tax residency certificates (TRC) stating that it will not question the validity of TRCs held by foreign investors, while noting the current double-tax treaty with Mauritius remains in effect capped the losses on the last day of the week.

Alongside GDP for the December quarter of FY13 added to the woes of the markets. GDP for the nation parked way below market anticipation of around 5% to 4.5% and down from 5.3% in Q2FY13. The economy clocked the lowest growth in past 15 quarters during Q3FY13. The economy is being hurt by slowdown in agriculture, mining and manufacturing.

Continuous slowdown in the services sector in the past seven quarters, with no sign of bottoming out, is the biggest concern. However, the slight recovery in manufacturing and investment activities is the silver lining in the otherwise extremely somber macroeconomic environment. Manufacturing, accounting for 15% of the GDP, has been sluggish in the past six quarters, recording an average growth of just 1.7%. Nevertheless, the 2.5% growth in 3QFY13 is the highest in the past four quarters.

The Union Budget for FY 2014 that was tabled on the last day of February may be called a realistically balanced budget that reflected Shri Chidambaram's commitment to fiscal prudence. The Budget pegged the fiscal deficit at 4.8% for FY14 and at 5.2% for FY13. Revenue deficit for the current year has been estimated at 3.9% and for FY14 at 3.3%. While on the other hand the veteran Finance Minister slapped a 10% surcharge on 'super-rich' individuals and corporates, levied an inheritance tax and raised duties on mobile phones, cigarettes and luxury vehicles.

In an attempt to encourage investment in capital markets, the Finance Minister curtailed STT on equity futures and mutual fund units. The government also introduced a tax on transaction of non-agricultural commodity futures contracts on exchanges as Commodity transaction tax (CTT) so as to facilitate a more open and transparent trading process, especially in gold contracts at 0.01%.

The railway budget on the other hand was more of an unbalanced statement rather than a reformatory guidance to the sagging Indian Railway's that has been tormenting from years of low investment and political meddling. The HSBC Markit manufacturing PMI which gauges business activity in Indian factories but not its utilities rose to 54.2 in February after falling to 53.2 in January.

Source : Equity Bulls

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