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Informist, Saturday, Feb. 1, 2025

By Alina Geogy

MUMBAI – Domestic equity indices may be volatile next week, with major events such as the Reserve Bank of India's monetary policy outcome lined up and as investors assess developments around tariffs imposed by the US on its trade partners. Benchmark indices are expected to be range-bound in upcoming sessions due to temporary overbought conditions, even though the overall trend in the market remains bullish for the short term, analysts said.

"Now, the major Union Budget is behind us, and it appeared as a non-event, but practically speaking, FIIs (foreign institutional investor) participation was very minimal. Hence, the actual reaction is likely to be witnessed on Monday and hence, we need to wait for a day or two to understand whether the market has really discounted the Budget factor or not," Osho Krishan, senior technical and derivatives analyst at Angel One, said in a note.

"Additionally, the risk with respect to Donald Trump imposing various tariffs is still looming over. Hence, it's better not to jump to any conclusion at this moment and better to keep a close eye on these developments," Krishan said. As per the latest developments in the US, media reports said President Donald Trump has ordered the implementation of 25% tariffs on products from Mexico and Canada, and a 10% charge on goods from China. Almost 30% of all imported goods in the US come from its trading neighbours, according to reports. Trump also said the US would impose tariffs on computer chips, pharmaceuticals, steel, aluminium, copper, and oil and gas imports as soon as mid-February.

Consumption-linked sectors are set to benefit in the medium-term from the income tax relief to the public at large in order to address the slowdown in consumption, analysts said. Finance Minister Nirmala Sitharaman on Saturday announced that there will be no tax on personal income of up to INR 1.2 million, which is expected to spur consumption, especially by the middle class. "Revving up consumption in the near term would provide additional triggers for both central and private capex to revive in the medium to long term," ICICI Direct Research said in a report.

Stocks linked to agriculture or crop protection are likely to gain in upcoming sessions after the government's proposals to boost the rural economy and ramp up agricultural production. The government said it would raise the loan limit on the KISAN credit card, address underemployment in the farm sector, and plan to increase output of cotton, pulses, and others. Sectors such as footwear, leather, and food processing also received a boost in the Budget. 

The sentiment towards insurance stocks is likely to improve in the near-term after the government increased the foreign direct investment limit for the sector to 100% from current 74%. This applies to all insurers who invest their entire premium within India, Sitharaman said. "This action is anticipated to draw a surge of foreign investment, promote competition, and speed up innovation, all of which will improve the availability and cost-effectiveness of health insurance," Hanut Mehta, chief executive officer and co-founder of Bimapay Finsure, said in a note.

Companies of several sectors are set to benefit from a reduction in basic customs duty for various items. The cut in basic customs duty for consumer electronics such as flat panels may boost consumer electronics, and the duty exemption for electric vehicle batteries to promote manufacturing of electric vehicle batteries in India is a positive for battery chemical manufacturers, Manish Jain, chief strategy officer, institution business at Mirae Asset Capital Markets, said in a note.

The December quarter earnings of Nifty 50 company Power Grid Corp. of India are expected on Monday. Aditya Birla Capital, Divi's Laboratories, Tata Chemicals, Tube Investments Of India, Alembic Pharmaceuticals, Garden Reach Shipbuilders & Engineers, and Gland Pharma are also scheduled to post their Oct-Dec earnings on Monday.  End

Edited by Tanima Banerjee

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