Indian shares dip as volatility spikes ahead of budget
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By Bharath Rajeswaran and Manvi Pant
BENGALURU, July 23 (Reuters) -Indian shares reversed early gains to drop marginally in morning trade on Tuesday, with volatility rising ahead of the union budget, due at 11 a.m. IST, which could have a huge bearing on the trajectory of markets.
The NSE Nifty 50 .NSEI and S&P BSE Sensex .BSESN opened about 0.3% higher but were trading about 0.2% lower as of 10:22 a.m. IST. Volatility .NIFVIX rose to a six-week-high of 15.79.
"Volatility will remain elevated today as budget announcements will decide the direction of markets in intraday trade," said ICICI Securities analysts led by Dharmesh Shah.
A market correction cannot be ruled out, given the high valuations, they added.
The Nifty has hit multiple all-time highs through its roughly 13% rally this year, despite a near 6% slide on June 4 when Prime Minister Narendra Modi's party returned to power but by unexpectedly having to rely on allies. Still, the index has risen in each of the seven weeks since.
The budget is expected to focus on job creation and boosting consumption, which analysts expect will be positive for sectors such as consumer goods, real estate and autos.
But, analysts said investors are also cautious of negative surprises, especially related to taxes on capital gains or derivatives trading.
"If there are no changes in long-term capital gains tax that will be a big relief for the market and the market is likely to react positively to that," said VK Vijayakumar, chief investment strategist at Geojit Financial Services.
On the day, 11 of the 13 major sectors logged losses.
Federal Bank FED.NS jumped 2.7% after the central bank cleared the appointment of veteran banker KVS Manian as the lender's CEO.
It was the top gainer in among mid-caps .NIFMDCP100, which was down 0.2%. Small-caps .NIFSMCP100 were 0.5% lower.
India's Nifty volatility index rises to six-week high ahead of budget https://reut.rs/4d9lByY
Reporting by Bharath Rajeswaran and Manvi Pant in Bengaluru; Editing by Savio D'Souza
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