Budget to dictate near-term trend

Union Budget 2011-2012 to be presented by Finance Minister Pranab Mukherjee on Monday, 28 February 2011, remains a key near term trigger for the market. Fiscal consolidation, extent of infrastructure spending, clarity on key direct and indirect tax reforms viz. the Goods and Services Tax (GST) and the Direct Taxes Code (DTC), better targeting of subsidies are some important issues which investors are eyeing in the Budget. Stock specific/sector specific movement will be witnessed based on announcements for various sectors in the Budget.



Auto and cement stocks will be in focus as companies start unveiling monthly sales data for February 2011 from Tuesday, 1 March 2011.

The government's Economic Survey for 2011-11 tabled in the parliament on Friday, 25 February 2011, stressed on an urgent need to streamline land acquisition and environment clearances for infrastructure projects. The Survey has also favoured a phased opening of foreign direct investments in multi-brand retail saying it could help address concerns of consumers and farmers, besides bringing technical know-how.

The Survey also called for early introduction of the GST – a key indirect tax reform. The original deadline of 1 April 2010 for roll-out of GST has already been missed due to the lack of consensus between the Centre and states on the issue. GST is India's most ambitious indirect tax reform plan, which aims to stitch together a common market by dismantling fiscal barriers between states.

Concerns on corporate earnings remain. The unrest in the Middle East has accelerated a recent rise in commodity prices which could add to pressure on corporate profit margins caused by higher staff costs and higher interest rates.

The data on HSBC Manufacturing Purchasing Managers' Index for February 2011 is likely to be announced on Tuesday 1 March 2011. The index which indicates the health of the manufacturing sector edged up to 56.8 in January 2011 from 56.7 in December 2010.