Market Expectations High On Budget-Eve
The budget pressures are tugging at the Bombay Stock Exchange (BSE) sensitive index again with the pre-budget expectations in the run-up becoming stronger. An analysis of the movement of the stock market index reveals that over the past 10 years, the Sensex has dipped in the post-budget sessions on six occasions.
However, according to analysts, the post-budget blues have largely been due to much higher expectations in the run-on to the budget rather than factors like a lacklustre package for the capital markets.
This time round, the pre-budget week has witnessed some fresh buying activity, but the market sentiments have turned so weak that any positive announcements would be enough to push the Sensex and the capital markets in an uptrend.
Foreign institutional investors (FIIs) have strategically remained away from the markets in the pre-budget trading. But, a section of the FIIs is of the view that three issues - removal of the double taxation on dividends, buy-back of shares and a partial opening up of the insurance sector - could aid the revival of the capital markets.
According to Amit Ghose of HBSC James Capel, if these measures are brought in, the markets would react strongly. A clear announcement for investors on the disinvestment programme, particularly linked to a blue chip offering from the Gas Authority of India Ltd (GAIL), would aid the markets further.
Alok Sethi of Natwest Securities is of the view that sincere efforts to reduce the fiscal deficit, a time-bound programme for the infrastructure sector and the disinvestment programme would be seen as positive signals by the markets.
According to sources at Morgan Stanley, the stock markets are likely to hold up quite well after the budget announcements, even if it fails to deliver some of the key expectations which the media has highlighted in the past few days.
In recent years, it has been witnessed that the media/political circles hype in the pre-budget sessions has affected trading sentiments in the post-budget sessions.
This time round, while trading activity has been strong by local operators, the Sensex has moved from a level of 3358.47 on February 24 to 3427.87 yesterday.
Trading levels have also been on the higher end at both the BSE and the National Stock Exchange (NSE), but mainly indicating speculative trends through local operators.
The sentiment within the broking community is, however, not too strong, with the view that much of what was promised by the finance minister never really came.