Double trouble or booster shot? February 1 not just about Budget for Nifty trackers

While Finance Minister Nirmala Sitharaman is likely to present the Budget at 11 am in the Parliament, US Federal Reserve Chair Jerome Powell would announce the outcome of the two-day meeting of the world’s most powerful central bank’s rate setting committee at midnight.

With many policy decisions, including those related to the GST, being taken outside of the Budget day presentation, many market watchers do not see any major impact unless there are some unexpected announcements. On the other hand, in light of the global nature of inflation and interest rate policies, Powell’s words could have a bigger impact.

“We believe the FOMC will be more influential than the Union Budget. Over time, the Budget has lost its relevance because numerous actions are taken outside of the Budget. Consequently, we do not anticipate that the Budget will have an exclusive effect on the market,” Sunil Damania, Chief Investment officer, MarketsMojo, told ETMarkets.

He said if the Budget is favourable but the Fed decision turns out to be negative, the market can fall.

Budget Impact
Since 2013, Sensex performance in the pre-Budget fortnight has been mixed with the index trading in green six out of 12 times.

“Budget has historically been an important day for Indian markets. But after GST implementation, the impact of the Budget on the markets has been mixed,” points out Arpit Jain, Joint MD, .

Divam Sharma, Founder at Green Portfolio PMS, however, is of the opinion that the Budget will supersede market sentiments. “We are seeing a set of very positive commentary and that has set a very positive tone for expectations around the Budget. Allocations around infrastructure creation, defence, energy and manufacturing will be taken very positively by the markets. Whereas any negative surprises around capital gains, over populist spending will be punished,” he said.

Fed meeting outcome
In the first Fed meeting of 2023, Powell is widely expected to slow down the pace of interest rate hikes. CME FedWatch Tool shows a 91% probability of a 25 basis point rate hike in the two-day Jan 31-Feb 1 meeting.

“We have seen a deceleration in inflation and thus, the interest rate cycle may be seen peaking out. From that perspective, I believe that the Fed can do a 25 -35 bps hike. But instead of the hikes, I believe the commentary has become more important for the ongoing and future hikes. The commentary will set the stage for the market environment, which can greatly impact global markets,” Jain said.

(With data inputs from Ritesh Presswala)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)