Union Budget 2017: Sensex Cautious Amid High Hopes From Budget, PSU Banks In Focus

It is a big day for markets. Both Sensex and Nifty turned flat after opening marginally higher with shares of public sector banks advancing. Finance Minister Arun Jaitley is set to present Union Budget 2017 later in the day.  Markets' expectations are riding high given that it is the first Budget after demonetisation. From income tax to corporate tax cuts to measures to support the economy to more funds for public sector banks, expectations galore from Budget 2017. Stocks markets have already rallied to pre-denomination levels in anticipation of big announcements from the finance minister.  Analysts say that any disappoint could trigger a big correction in stock markets. 

Sajiv Dhawan of JV Capital Services says that feel good factor post demonetisation is still not there and Finance Minister Arun Jaitley should take this opportunity reignite the investor sentiment.  "I think the feel good factor is still not there across the board after demonetisation and this is an opportunity for the finance minister to reignite the sentiment by giving us some infrastructural push," he said. "He has to come out with some big reforms on tax cuts." Any Budget announcement on higher cash infusion in public sector banks and a roadmap for divestment would be hugely positive for stocks of state-run banks, say analysts. Income tax and home loan sops would be positive for consumer durable and real estate stocks. 

The index of public sector banks was up over 1 per cent, with SBI and Bank of Baroda up around 1-2 per cent. If there is any announcement on corporate tax cuts, it will be a big positive trigger for markets as the bottomline of companies would get an immediate boost, say analysts. 

However, if there is a change in capital gains tax regime or taxes on gains from stock market investments, it could spook markets, caution analysts. The Rail Budget has been merged with the Union Budget from this year. So a big hike in capital outlay for rail infrastructure will be a positive for railway-infrastructure related stocks. 

AK Prabhakar, head of research at IDBI Capital Markets & Securities, says markets have very high hopes from the upcoming Budget and it will be difficult for Mr Jaitley to fulfill them.  If there is a slight disappointment, markets could see a big correction, he added. If Nifty corrects below 8,300, then the correction would get deeper, he added.

At 9:19 am, the Sensex was up 40 points at 27,692 while Nifty edged higher to 8,574, up 13 points.