Union Budget 2024 fears unsettle broad market: Stress lines appear

Blue-chip records mask the quiet erosion in broader indices

Benchmark indices may be hitting new highs, but sentiment towards stocks in the broader market has been doddering over the past two weeks. The advance/ decline ratio (ADR) has remained at 0.85 during this period, reflecting that declining stocks 

have outnumbered those advancing.
 

This trend continues even as blue-chip indices like the S&P BSE Sensex and National Stock Exchange (NSE) Nifty 50 scale new peaks. Month-to-date, these indices are up over 2 per cent each, while broader market indices — the NSE Nifty Midcap 100 and NSE Nifty Smallcap 100 — have remained flat.
 

On Friday, the ADR stood at 0.35, with nearly three declining stocks for every advancing stock — this is the weakest reading since the Securities and Exchange Board of India chief raised concerns about valuations.

 

Profit booking at higher levels, worries about elevated valuations in small and midcap (SMID) stocks, and caution ahead 

of the Union Budget have contributed to the cooling of the broader market’s exuberance. “Profit booking is more intense in the broader markets and may persist for a few more weeks. Although selling continues, valuations in the SMID space remain elevated. We need another 10–15 per cent correction for some valuation comfort to set in,” says Chokkalingam G, founder of Equinomics Research.
 

Some attribute the weak market breadth to apprehension surrounding the Budget. “Investors are particularly concerned about potential changes to capital gains tax. Any adverse adjustments could induce market volatility and negatively impact investor sentiment. Maintaining the current tax regime would help sustain market stability and encourage long-term investments,” 

says Manish Jain, managing director of Bajaj Broking.