Sensex sinks as FM disappoints with Union Budget

It was expected to be a volatile session and the market didn't disappoint on that score with the key indices fluctuating through the Budget speech before slumping in late afternoon trade. Today's eventful trading session came on the heels of a bad session on Thursday. As if the disappointment of the RBI policy review was not enough, the market players had to contend with a Union Budget that fell short of expectations.

The sentiment gyrated wildly today as the Finance Minister went about his job of announcing various Budget proposals. He finished his Budget speech at ~1:00 pm. At that point, the market was trading positive but suddenly surrendered all of the day's gains post 2:00 pm on the back of some selling pressure seen in the Banking stocks, Oil & Gas and Power stocks.



The BSE Sensex ended at 17,466, down 209 points or ~1.1% over the previous close. It had earlier touched a day’s low of 17,871 and a day’s high of 17,426. It opened at 17,656.

The NSE Nifty settled at 5,318, down 63 points or 1.1% over the previous close. It earlier touched a day’s low of 5,445 after opening at day’s high of 5,305.

Technically, the Nifty managed to engulf the ‘Doji star’ appearing in the prior week. This move has reinforced a bearish view on the Nifty. Selling pressure is likely to worsen and the index might test the intermediate bottom of 5170. Already on the daily charts, an appearance of ‘evening star’ pattern on Thursday had confirmed a trend reversal below 5390 levels and the same will now turn into major a resistance.

On Friday, the BSE Sensex and the NSE Nifty hit session lows in late afternoon after opening the day near day's high. The selloff was equally bad in the Mid-Cap and the Small-Cap space. The market breadth was weak. However, the volatility index slumped sharply.

The INDIA VIX on the NSE plummeted 9% at 23.13 after being as high as 25.42 and as low as 22.58. It had closed at 23.13 yesterday.

The BSE Mid-Cap further slipped the index fell 0.7% while the BSE Small-Cap index ended lower by ~1.1%.

On a week on week basis, the benchmark Indian stock indices ended in the negative terrain with the Nifty and Sensex losing ~0.3% apiece.

The Union Budget has not gone down particularly well with the markets and investors, who were perhaps looking for a little more by way of fiscal consolidation to give the RBI room for reduction in interest rates next month.

The fiscal deficit estimate of 5.1% of GDP for FY13 is better than the final 5.9% of GDP for FY12. However, the Government might find it tough to meet this goal given the political resistance to any rationalisation of subsidies. Sticky crude oil prices might also add to the fiscal stress. The disinvestment forecast and projections on revenue receipts may also fall short in case the economy fails to revive.

"With most big events of the month behind now, the Indian markets would focus on the global markets and liquidity flows. The next month's annual policy by the RBI will be the near-term trigger. It remains to be seen how the central bank views the Budget, particularly the announcements on fiscal consolidation and subsidies. Till then, the market indices are likely to be choppy and rangebound. The Nifty may trade between 5150 and 5400," says Amar Ambani, Head of Research, IIFL.