Market Eye Weekahead - India's bond and forex markets are gearing up for one of the key annual domestic events: the budget for the next fiscal year starting in April, to be announced on February 28.
Investors will closely scrutinise the budget to see whether India delivers a credible plan that can contain the fiscal deficit at a targeted 4.8 percent of GDP for 2013/14.
Much is at stake in the budget, given the threat of India losing its investment-grade rating from Fitch and Standard & Poor's.
Whether the government can avoid its usual habit of ramping up spending ahead of general elections, due by 2014, will be particularly key.
Bond investors will check whether India can hold gross market borrowing at 5.7 trillion to 6 trillion rupees, which will be a key indication of the government's fiscal discipline.
The 10-year benchmark bond yield is expected to hold in a 7.75 to 7.83 percent range until the budget, with the yield likely to drop below 7.75 percent if the gross borrowing number is lower than 5.7 trillion rupees.
Forex traders would look for cues on how the government plans to revive investment in key sectors which will be crucial in bringing in dollar inflows and boosting the rupee.
The rupee is seen holding in a 54.10 to 54.80 per dollar range until the budget.
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It remains to be seen whether Nifty will be able to break the 8,100 mark during October. With major events out of the way, the next trigger will be the Q2 FY16 earnings season which is expected to kick off next week. It is advisable for the investors to continue building their equity portfolio by utilising market volatility as an opportunity, writes Ambareesh Baliga. Full Article