Bull phase likely to sustain amid FII inflows

Cherukuri Kutumba RaoBuoyed by the TCS Q1 dhamaka, renewed buying in FMCG stocks, good monsoon progress, the rising expectations over US Fed rate cut following softer than expected inflation data, and hopes of a growth-oriented Union Budget; the domestic stock market recorded gains for sixth consecutive week. BSE Sensex climbed 523 points or 0.65 per cent to 80,519, and NSE Nifty jumped 178 points or 0.73 percent to 24,502, while Nifty Midcap-100 and Smallcap-100 indices ended moderately higher, underperforming the benchmark indices. FIIs have net bought Rs3,844 crore worth of equity shares in the cash segment in the week gone by, while the DIIs outpaced FIIs, purchasing Rs5,391 crore worth shares during the week. Higher participation by FIIs is one of the key reasons behind the sustained rise of Sensex and Nifty, which ended in the green for the sixth consecutive week to end at fresh record highs. The outstanding performance in direct tax collections, fuelled by the 7-8 per cent economic growth, has raised expectations that Finance Minister Nirmala Sitharaman will offer personal income tax relief in the upcoming Budget. Ahead of the Budget, Q1 earnings will be a key focus this week as numerous companies, including HDFC Life Insurance Company, Bajaj Auto, BPCL, JSW Steel, Asian Paints, Infosys, Wipro, Paytm, Jio Financial Services and Reliance Industries are set to release their results. Additionally, pre-Budget discussions are expected to contribute to market volatility.

Expect stock-specific moves to gain traction due to the ongoing earnings season. All eyes are on the much-awaited Budget proposals to be tabled on July 23. For this bull market to continue without any roadblocks with respect to the budget, there are two very simple expectations from observers: first, this budget should lay out the vision of this government for the next five years, like they did in their earlier stint. The second one is that the government ideally should continue to maintain its focus on asset building, and nation building, which is by way of its investment in defence, infrastructure, road building, ports, railways, etc. In order to maintain the equilibrium in the equity market, the government should not fall to the temptation of tinkering with any of the taxes concerning the capital market. The government should not trifle with respect to capital gains tax structure, STT, or derivatives on any of these matters. Markets will remain closed on Wednesday for Muharram.

(The author is a senior maket analyst and former vice- chairman, Andhra Pradesh State Planning Board)