February 1st 2024 Stock Market analysis

‍Market today: Nifty and Sensex Close Mildly in the Red After Budget; Focus Shifts to Q3 Earnings for Market Returns

The Indian benchmark indices, NSE Nifty and BSE Sensex, ended with mild losses on February 1st as market participants' reaction to the budget announcements remained subdued. Selling pressure was observed in metal and pharma stocks, while PSU Bank stocks shone with the Nifty PSU index jumping over 2 percent.

Analysts view the Budget as well-grounded, prioritizing fiscal prudence and capital expenditure over consumption. Sectors such as power, new energy, railways, defence, and housing are expected to benefit.

While Finance Minister Nirmala Sitharaman emphasized economic reforms to drive growth in her budget speech, avoiding significant spending on new welfare programs ahead of the election, the Indian government's commitment to tightly control subsidies is seen as a positive sign for domestic equities, according to Union Asset Management Company CEO Pradeepkumar. Despite expectations of a potential consolidation in equities over the next few months due to a likely delay in U.S. rate cuts and high valuations, three analysts have expressed a positive overall outlook for Indian markets. The U.S. Federal Reserve's decision to hold interest rates steady on Wednesday, while indicating a reluctance to cut rates until inflation eases further, adds another dimension to the market dynamics.

The Sensex concluded the trading session 106.81 points lower, representing a decline of 0.15 percent, closing at 71,645.30, while the Nifty experienced a decrease of 36.00 points or 0.08 percent, settling at 21,707.25. Among the top gainers on the NSE Nifty were Maruti, trading at 10,549.35 with a gain of +3.56%, Powergrid, traded at 266.3 with a +2.70% gain, and M&M, traded at 1682.7 with a gain of 1.89%. Conversely, the top losers included DrReddy, traded at 5974.25 with a loss of -2.40%, ONGC, traded at 247.4 with a loss of -1.92%, and Ultracemco, traded at 9981.05 with a loss of -1.83%. Notably, Power Grid emerged as the most actively traded stock by volume, with 1,93,32,577 shares transacted.

Technical Outlook on 2nd February 

While Nifty is anticipated to find immediate support levels near 21,610 followed by 21,523, with resistances expected at 21,784 and 21,871, the current outlook suggests a mixed trading scenario. Conversely, Bank Nifty may encounter immediate support around 45,870 and 45,552, while facing resistances at 46,347 and 46,507. Presently, Bank Nifty also appears to be in a mixed trade situation.

Derivative Outlook on 2nd February 

PCR Analysis: Nifty PCR-OI has decreased with nifty has negative close which shows CALL WRITING.

Open Interest Analysis: Nifty future Feb contract OI has decreased with negative close which shows Long Unwinding.

Cost of Carry Analysis: Nifty FEB month contract has ended in low compare with MARCH contract and low range compare with previous session which indicates a negative bias.

India VIX Analysis: India VIX has closed at 14.46 vs 16.05 (DoD) basis which shows decrease in volatility.

Here are five key takeaways for investors from Budget 2024

1. Favorable Fiscal Deficit and Borrowing Figures: The fiscal deficit projected at 5.1% and net borrowing of Rs 11.75 lakh crore for FY25 surpassed street expectations, offering a positive outlook for bond markets.
2. Stable Growth in Capital Spending: With capital spending growth estimated at 12%, in line with expectations, it is poised to bolster economic growth until private capital expenditure gains momentum.
3. Emphasis on Infrastructure Development: The budget underscores a focus on vital infrastructure segments such as railways, metros, power, and capital goods, indicating sustained government support for these sectors through spending initiatives.
   

4. Tax Regime Remains Unchanged: There are no alterations in long-term or short-term capital gains tax, as well as direct or indirect taxes. This ensures that post-tax return economics remain consistent across various asset classes for local investors.
5. Overall Positive Impact on Markets: The budget's provisions are anticipated to have a positive impact on markets, potentially attracting foreign investors as global liquidity flows back to emerging markets.

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