Markets remain bullish, give a thumbs-up to Economic Survey 2016

Indian stocks took heart from bullish statements made by the Finance Minister on Friday and edged higher as traders went long on front line shares on the first day of the monthly expiry of derivatives contracts. Investors saw hope after the government signaled its intention to stick to the pre designated target for the fiscal deficit for next financial year. Beaten down banks led the gainers on Dalal Street.

The Nifty traded 68 points higher at 7,037 points after dipping to an intra-day low of 6,985 points. The index had opened on the higher side owing to strong global cues but traders chose to sell into the rise in early deals. Local stocks are trading at 21-month lows after markets were routed by a combination of a global contagian in equities and next to no growth in quarterly earnings of top 50 companies over the past two quarters.

'Despite volatility in global financial markets, the Indian equity market has been relatively resilient during this period compared with other major emerging market economies,'' said the Economic Survey which was tabled by Arun Jaitley in Parliament ahead of the presentation of the annual budget on Monday. The document said it would 'credibility and optimality argue for adhering to 3.5 percent fiscal deficit target'.

If the government keeps its expenses within the prescribed fiscal limit it would borrow less and, therefore, the Reserve Bank of India would have the required head room to cut interest rates further and keep inflation under check.

Some economists have argued that the government should shelve the deficit target for at least a year and spend aggressively to kick start demand in the economy which is slated to grow at 7-7.5 percent in the next fiscal year to March 2017. However, public finances are so structured that Jaitley has little or no flexibility to increase spending despite a slow down in both global and local demand for Indian goods.

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