Optimistic outlook: Domestic equities ride high on interim budget boost

In a week marked by optimism and positive sentiment, domestic equities are likely to sustain their upward trajectory, buoyed by the commendable interim budget and anticipation of the Reserve Bank of India's (RBI) imminent monetary policy meeting scheduled from February 6-8. Investors are eyeing the central bank's decisions with bated breath, anticipating a status quo in the wake of the fiscal measures outlined in the interim budget.
Apart from this, investors will continue to take cues from the ongoing earnings season and economic data to be released. Key events include India & United States service sector output data, Australia monetary policy, and China inflation data.Last week, Nifty saw a rally of 500 points (+2.3%) and scaled a new high of 22,126 after the government displayed a fine balance between growth and fiscal prudence in the interim budget. The index closed at 21,854 levels. Broader market outperformed with Midcap 100 up 2.7% and Smallcap100 up 5.6%, respectively, according to information.
Moreover,majority of sectors closed in positive territory, with robust buying seen in PSU Banks, Oil & Gas, Metals, Auto, and Realty. The impetus for this widespread optimism was provided by Finance Minister Nirmala Sitharaman's announcement of lower- than-expected fiscal deficit and gross borrowing targets for the next financial year. The ripple effect was particularly evident in the PSU banking sector, where stocks surged over 11.5%, propelled by a significant drop in the 10-year government bond yield to an 8-month low.
With the positive momentum generated by the interim budget, domestic equities are likely to be positive for continued gains. All eyes are now on the RBI's monetary policy meeting, where market participants hope for policy continuity that aligns with the broader economic recovery objectives. As the week unfolds, investors will be closely tracking developments, ready to recalibrate their positions based on the central bank's guidance and the evolving economic prospect.

(Ira Singh, Asstt Editor, Gandhinagar)