Market Volatility Persists as Inflation and Other Global Crises Remain Unresolved.

Indian markets are no exception to global market plunges in contemporary weeks, as NSE Nifty and BSE Sensex concluded yet another volatile week in the red, to end on 17,374.95 and 58,152.92 respectively. 

Both benchmark indices shed over 0.8% in the week ended February 11, a week which saw higher-than-expected US inflation data perturb investors globally in anticipation of aggressive hiking by the US-Federal Reserve, profuse selling by foreign institutional investors, as well as RBI policy announcements. 

The U.S. inflation rates soared to 7.5%, a four-decade high, with imminent increases in interest rates increasing apprehension towards selling by foreign investors in Indian markets, which have sold Indian equity holdings of $5.58 billion, compared to $5.08 billion the previous year (The Mint).

Focusing on market performance on Friday the 11th, domestic indices fell victim to weak global cues, resulting in sharp falls, following Wall Street’s response to the adverse inflation revelations. Sensex concluded the session 773 points below its close on the previous day, as compared with Nifty, which closed 260 points lower than on February 10th. Considerable selling pressure resulted in the market slipping by 1.3%, with all of the sectoral indices also closing with losses.

Further volatility is definite to persist in the following weeks as the Fed prepares to raise interest rates, and hence, Wall Street would need to be able to navigate through a high-interest environment, which will have considerable impacts on global markets.

Exacerbating tensions on the Russian-Ukrainian front will continue to accentuate tempestuous global market performances, as the latter is expediting preparations to commence a full-capacity invasion.

Investors are advised to maintain a neutral outlook and should be wary of domestic inflation rates to determine future trajectories.

Union Budget 2022: A Theme of Continuity, A Plethora of Sectoral Boosts and Increase Digitisation

Having been nearly 2 weeks since finance minister Nirmala Sitharaman’s presentation of the expectantly meticulous Union Budget 2022-23, satisfaction and skepticism continue to surround the budget’s provisions. A primary focus has been established on consolidating existing reforms, as well as accelerating growth in the midst of inflation surges and attempted Covid recoveries for the forthcoming fiscal year. The 2022-23 budget strives to further enhance India’s digital revolution and to propel India further in its quest to become a global economic superpower.

Revised economic projections by the International Monetary Fund (IMF), in its World Economic Outlook, coupled with the Lok Sabha Economic Survey, has adjudged the nation’s economic growth to be at 9% and 9.2% respectively for the upcoming fiscal year. These projections enable the nation to be projected as the fastest growing economy in the world, for the specified period.

Macro-economic growth was the impetus, as the capital expenditure (money to be spent by the government) expanded by 35.4% to Rs. 7.50 lakh crore ($99.5 billion). The expected fiscal deficit for FY 22-23 is capped at 6.9%, and implementations in fintech, tech-enabled development and green energy transition will be the top priorities.

The 100 lakh crore ambitious and multi-modal nationwide infrastructure regime, proposed by the Prime Minister in accordance with India’s 75th year of independence, received immense boosts to propagate economic growth. These are inclusive of but are not limited to, the expansion of the national highways network by 25,000km within 2022-23, as well as the establishment of 100 cargo terminals within the next three years.

One of the most reaction-inducing developments involves the announcement that all income from the transfer of any digital asset, namely cryptocurrencies, will be taxed at 30%, as well as the fact that updated income tax returns can be filed within two years of the pertaining year. No changes were launched for the taxing of the middle and upper classes, disappointing taxpayers from said categories.

In other developments, 2.37 lakh crore has been allocated towards the procurement of wheat and paddy, Rs. 60,000 crore has been allocated to provide access to clean water to 3.8 crore households, the Emergency Credit Line Guarantee Scheme has been extended to March 2023, as well as strong allocations have been produced to enhance green energy transition.

Finally, in regard to the most significant digital developments conveyed in the budget address, the Reserve Bank of India will be launching a blockchain-based digital currency that will become prevalent across the nation, the rollout of 5G will start taking place, and a revolutionised national healthcare portal will be established, all within the upcoming financial year. E-passports are another highly anticipated provision that is scheduled to be rolled out within the same period.

Written and collated by Ronojoy Borpujari 
Written with input from The Mint, Economic Times and the Press Information Bureau of India