Indian markets rose in a relief rally as fears of an extension of the holding period for long-term capital gains (LTCG) in Budget 2017 proved unfounded. The bulls stepped on the gas as soon as Finance Minister Arun Jaitley ended his budget speech.

Keeping the fiscal deficit target of FY18 at 3.2 percent also cheered the markets. Income tax rates were halved for “bottom of the pyramid” tax payers while status quo was maintained in service tax rates.

Fiscal prudence, focus on rural economy, affordable housing and abolishing the Foreign Investment Promotion Board (FIPB) were some measures that pressed the right buttons for investors. On the flip side, lower allocation for PSU banks recapitalisation, no focus on job creation and a lack of big bang announcements were disappointing.

Overall, Budget 2017 had goodies for everyone with not many unfavourable provisions.Affordable housing projects have been given infrastructure status, which will result in better access to finances and increased participation from private players. In another positive development, the holding period for computing LTCG on immovable property has been reduced to two years from three years.

Jaitley reiterated implementing Goods and Services Tax (GST) within the stipulated date. Net market borrowing at 3.48 trillion rupees in FY18 is lower than market expectations. With focus on fiscal prudence continuing along with comfortable liquidity, expectations are building up for a 25 bps rate cut in the upcoming policy.

The Fiscal Responsibility and Budget Management (FRBM) committee has recommended that a sustainable debt path must be the principal macroeconomic anchor of the fiscal policy and has targeted a debt to GDP ratio of 60 percent by 2023.

In his budget speech, Jaitley proposed to merge existing state-owned oil and gas firms to form a global giant that would be able to compete with the likes of ExxonMobil Corp and Royal Dutch Shell Plc. The details of the mega plan are awaited. However, integration would be tough and trade unions may be difficult to tackle, and the actual implementation could take time.

Budget 2017 laid down an ambitious FY18 divestment target of 725 billion rupees which is higher than last year’s target of 565 billion rupees. It proposed listing of railway PSUs in a time-bound manner.

Unanticipated measures in the budget include capping the limit on cash transactions to 300,000 rupees and reforms in political funding. But there is no tax on cash withdrawals from banks as was widely feared.

The U.S. Federal Reserve policy meet went largely unnoticed as it kept rates unchanged as expected. Announcements from U.S. President Donald Trump’s office on immigration curbs unnerved investors across the world, but Indian markets continued to rally and gained a little over 1 percent for the week with the Nifty at 8,741.

Among global macro events, the U.S. jobs report on Friday showed that the economy added 227,000 jobs in January, significantly more than forecast. China's official manufacturing PMI fell to 51.3 in January from 51.4 in the previous month. Euro zone manufacturing PMI was reported at 55.2 in January, the highest since 2011.

On the domestic corporate results front, prominent firms expected to report earnings in the coming week include Dr Reddy's Labs, Tata Steel, BHEL, PNB and Cipla.

One should use this sudden up move to continue booking profits. The momentum and a favourable RBI policy could take the Nifty up by another 100-150 points to 8,850-8,900 levels. But crossing earlier highs without favourable results from the ongoing state elections seems difficult. It’s a good opportunity to book profits.

(Ambareesh Baliga has about 25 years of experience in the stock market and has worked with Karvy and Kotak groups in the past. He is a regular market commentator on various business channels. He is a commerce graduate from Calcutta University and a qualified cost accountant.)