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| No pre-Budget rally this time: Analysts |
| Press Trust of India / New Delhi Feb 21, 2010, 19:21 IST |
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Will there be a pre-Budget rally this time around or not is the question that is haunting the traders as the markets enter the Budget week.
However, analysts are of the opinion that a rally seems unlikely in the current scenario as the market is under selling pressure and volatility will persist in the market in the run-up to the Budget.
"The expectations from the Budget are relatively low this time around. The market is expecting a Budget that is growth oriented and adheres to fiscal targets. It may not become euphoric this time before the Budget," Kotak Securities Managing Director Narayan SA said.
Benchmark indices have dropped around 12 per cent since the highs it touched last October. Analysts believe the Budget will no longer impact the market in a major way as global cues will also determine the movement.
"Global events are dictating movement more than local expectations. There are not much positives expected out of the Budget and hence we do not expect it to rally," HDFC Securities Head-Private Broking and Wealth Management Vinod Sharma said.
Over the last 18 years, the markets have fallen 2-7 per cent in the run-up (five trading sessions before the Budget) on nine out of 20 occasions.
"The markets would be volatile and no big rally is expected before the Budget as investors are aware of the position of the Finance Minister and do not have big expectations," Unicon Financial Chief Executive Gajendra Nagpal said.
The domestic markets fell over 7 per cent in 1998, 2000 and 2007, and it gained 23 per cent, 6, 3.2 and 0.86 per cent in 1992, 1997, 2004 and 2009, respectively, during the week before the Budget.
Market is waiting for clarity on aspects like disinvestment, FDI and stimulus package withdrawal, but investors would also track overseas cues to invest.
"The markets may not witness a pre-budget rally as is expectation of rollback of some of the fiscal incentives. But any policy initiative towards infrastructure development like highways, power may make the markets rejoice," SMC Group Chairman Subhas Chand Agarwal said.
The week after the Budget has been mostly tepid for most of the years since 1991. While in 1991 (the market gained 10 per cent), 1992 (17 per cent) and 1999 (7 per cent), in other cases it traded in a narrow range.
Some of the biggest post-Budget market declines have been in 1993 (-7 per cent), 1994 (-13 per cent) and 2008 (-9 per cent) and 2009 (-4 per cent cent).
Meanwhile, brokerages are optimistic that any fall in Asian indices would now be limited in percentage terms.
"Investors want to buy more Indian shares but most are both expecting and hoping for more of a pullback," foreign brokerage CLSA said.
Echoing similar views, Saurav Arora of Jaypee Capital said "India remains a buy/sell strategy, rather than a sell/buy."
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