Interim Budget 2019: Infra, realty to get attention, says Epic Research

The range for the market is likely to be in a range of 11,200 to 10,700 on the downside. So given the days left to budget, we expect the market to test 11,100 - 11,200.

Union Budget has always been an event when we expect volatility to expand with perception to safeguard the portfolio and hedge the overall risk in the market as we see a lot of activity in the derivatives. This Budget is no different than previous but the fact remains it is coming in an Election year.

Definitely, we believe the coming budget will be about giving benefits that make an impact, at large. Since there are many things to do so as the current environment is favorable. The low inflation environment, GDP growing with a rate above 7 per cent,  higher FDIs and on the top of it, a contained fiscal deficit. This certainly gives extra space for the budget to be populist.

A recent wave of farm loan waiver has also increased the expectations in the economy and is now seen as a game changer for any political party during elections. So yes, we expect there may be some populist measures that can be seen in this budget.
The range for the market is likely to be in a range of 11,200 to 10,700 on the downside. So given the days left for the budget, we expect the market to test 11,100 - 11,200.

Only a decisive break beyond that we can witness the next move since that would call in for a much aggressive rally which may be supported by short covering as well. On the downside, support is established at 10,700 - 10,650. These are important for this move and a breach of these levels will see a downward move to take the index to lower levels of 10,200 - 10,250. 

Construction, infrastructure, real estate & housing, at large are likely the sectors that are going to see special attention in the 2019’s Budget since that has been the trend for last few years in present government. Water and sanitation along with a focus on rural projects will be seen. Fertilizer, as an industry, may see some good news since a lot of focus will be seen on improving the present circumstances in the agricultural sector. These sectors are driven, mainly based on government policies and rely on the subsidised and favorable environment.

Markets are likely to see an expanded move, though study suggests we may see a move higher that can take the market to the levels of 11,100 - 11,150. We expect a halt at the levels of 11,100 - 11,200 since a very strong resistance is placed there. Historically, the market has reacted to Budget in a positive way. Take the case of last year when global markets were taking a toll of volatility. So, mostly we have seen double-digit returns post Budget. 

Post Budget, we can see some profit booking on reshuffling of the portfolio which may shift towards specific sectors and stocks. Though the earnings outlook for most companies in the Nifty50 index remains in double-digits, we may see some margin pressure. The Small-cap and Midcap have been beaten down due to lower earnings, rising pressure on margins. Hence, we expect the rally to be participated largely by blue chips with visible earnings growth. This makes our view specific on select stocks in 2019. Though, the overall trend remains largely positive it would be prudent to utilise the dips. 

Post Budget, we expect volatility to rise but the undertone of the trend may be visible due to the fact that a lot of news will be discounted in prices. A lot will also depend on global macroeconomic activity and Fed rates. A tightening environment may dampen the outlook while soft crude prices shall continue to support the positive sentiment in Indian equity markets. Any change there might hamper the trend. Lastly, it all comes down to the mandate that is given in Lok Sabha as a decisive mandate brings a lot of money flow into the market for a longer time horizon that can help in a capital generation. UPL Ltd, Titagarh wagon, NCC, NBCC, Dilip buildcon are few stocks we expect to see some positive momentum after the budget.

It may be a Budget that is expected to attract the masses and when we put that in perspective, we simply mean common man, the largest tax base. So to put it in numbers we have seen a growth of 40 per cent in total taxpayers in the last five years. That is huge when we talk about Tax to GDP ratio and which actually keeps our Budget deficit lower. So that ratio has jumped by 56 per cent in the last few years. And when we talk about individual taxpayers, it has been up almost 41 per cent. So, these numbers are big for us and definitely gives a huge liquidity that drives the overall consumption-based economy. 

So the much talk about Tax rates - slab change if comes into effect, can flourish the market with the liquidity and certainly consumption-based stocks, Automobiles, and to an extent, the real estate will see its direct effect. 

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The author is the CEO at Epic Research