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Indian markets surged on Friday a day after the presentation of the interim Budget 2024, aided by the positive global sentiment. Today, markets are likely to get negative start amid escalation in the Red Sea crisis, and concerns over delayed rate cut by the US Federal Reserve. With militant attacks on commercial ships in the Red Sea getting more frequent, the Indian shipping is all set to bleed as its vessels now circumnavigate Africa through the Cape of Good Hope to reach the country. The transit time between northwest Europe to Asia has increased from 16 days to 32 days, incurring an additional cost of around $1 million per voyage.  The Reserve Bank of India’s (RBI) policy outcome on February 08 remains the key economic event for the week. Investors will be looking ahead to the Services PMI data to be out later in the day for cues. However, foreign fund inflows likely to aid sentiments. Foreign institutional investors (FIIs) net bought shares worth Rs 70.69 crore on February 2, provisional data from the NSE showed. Some support will come as the Reserve Bank of India (RBI) said India’s forex reserves increased $591 million to $616.733 billion for the week ended January 26. In the previous reporting week, the overall reserves had dropped $2.795 billion to $616.143 billion. Traders may take note of CRISIL’s latest report that the Indian economy is expected to grow at an average rate of 6.7% per annum until the end of the decade. The economy will grow at this rate between the financial years 2024 to 2031, a notch above the pre-pandemic average of 6.6%. According to CRISIL, the key contributor to this trend will be capital. Meanwhile, Finance Minister Nirmala Sitharaman said global ratings agencies should view India's reforms as a whole and that macroeconomic stability had been maintained. The Indian government has been in a running battle with global ratings agencies S&P Global Ratings, Moody's Investors Services, and Fitch Ratings as it thinks the sovereign rating assigned to the country is not a fair reflection of its economic strength. There will be some reaction in infrastructure industry stocks as Secretary Anurag Jain said the Ministry of Road Transport and Highways (MoRTH) aims to create a national record by constructing 13,813 km of highways in the current financial year. Jain said the ministry aims to eliminate less than two-lane national highways by 2027-28. Investors will be keeping close eye on earnings of many companies to be out later in the day for more directional cues.

The US markets ended higher on Friday as strong earnings and a blowout January employment report boosted confidence in the economy, even while lowering the likelihood that the Federal Reserve will cut interest rates any time soon. Asian markets are trading mixed on Monday as investors awaited policy decisions from key central banks, including from the Reserve Bank of Australia on February 06.

Back home, Indian equity benchmarks ended with gains of over half percent on Friday helped by buying in Oil & Gas, Energy and Metal stocks. Strength in overseas peers also aided the sentiment. Markets made a positive start and traded in green for whole day, as sentiments got a boost with Commerce and Industry Minister Piyush Goyal’s statement that India has sustained its export growth notwithstanding the global challenges emerging due to issues like the Israel-Hamas war and the Budget has laid out a strong foundation to push the economic growth. Traders got support as the government's gross tax revenue is projected to grow 11.46 per cent to Rs 38.31 trillion in the next fiscal (FY25), buoyed by 11.6 per cent growth in Goods and Services Tax (GST) collections. GST collection in 2024-25 is estimated to rise to Rs 10.68 trillion, an increase of Rs 1.1 trillion or 11.6 per cent. However, markets cut some gains in afternoon deals but managed to end the session in green as some optimism remained among traders with Managing Director of International Monetary Fund (IMF) Kristalina Georgieva’s statement that the economic success of India is grounded in the pursuit of reforms over the last years and exuded confidence that it would achieve its goal of being a developed nation by 2047 by staying the course. Some support also came in as the government has targeted a fiscal deficit of 5.1 percent of the GDP for 2024-25. In absolute terms, the fiscal deficit for 2024-25 is seen at Rs 16.85 lakh crore, with the number for 2023-24 lowered to Rs 17.35 lakh crore from the budget estimate of Rs 17.87 lakh crore. Meanwhile, Central Board of Direct Taxes (CBDT) chief Nitin Gupta said that the income tax department has garnered about Rs 4,600 crore in taxes from 56 lakh updated I-T returns filed by taxpayers in the past two years. Finally, the BSE Sensex rose 440.33 points or 0.61% to 72,085.63 and the CNX Nifty was up by 156.35 points or 0.72% to 21,853.80.

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