We now have statistical evidence to substantiate that the green shoots in India have blossomed further. FY10 GDP is set to grow 7.2%, says the Government. This figure is subject to revision, which hopefully will be on the higher side. In fact, the RBI sees a 7.5% growth in FY10 GDP. Apart from the subdued credit growth and tepid tax receipts (partly owing to fiscal stimulus) most other economic indicators have improved substantially. This suggests that India has weathered the global financial storm well and needs to sustain the momentum.
The ball is now in the Finance Minister’s court. In that context, Feb. 26 will be a crucial day. Pranab Mukherjee is likely to take a calibrated approach to unwinding the fiscal stimulus. He has his task cut out on the fiscal front. So, we expect him to articulate strategy to return to the path of fiscal prudence. Any deviation from this will be disappointing. The key would be to keep expectations low before the Budget.
Today we expect a flat opening due to indecisive global cues. The Dow Jones has closed below 10,000. Stocks in Europe finished higher. Asia is pretty much mixed. Derivative indicators are pointing to further weakness. Technically, 4700 could give near-term support to the Nifty while resistance might kick in at 4800. The 200 DMA of 4640 will continue to be a crucial level to watch. The broad range for the Nifty remains at 4700-4900 for now. Relentless FII selling is a big handicap for the bulls in the near term.
Our sense is that the market will be sideways and choppy amid continued uncertainty over the health of the global economy and prospects for the Indian economy in FY11. Monsoon will be another big variable that could potentially influence the market's direction going forward. There is also some risk as far as Government policy is concerned as it tries to execute an effective 'exit' strategy from the unprecedented fiscal stimulus.
FIIs were net sellers in the cash segment on Monday at Rs9.35bn on a provisional basis while the local funds were net buyers of Rs3.81bn, according to figures published on the NSE's web site. In the F&O segment, the foreign funds were net buyers to the tune of Rs4.05bn. As per SEBI figures, the FIIs were net sellers of Rs16.29bn in the cash segment on Friday.