| Eye on Budget, markets start rallying |
| Krishna Merchant / Mumbai February 18, 2011, 0:53 IST |
The sharp turnaround in the Bombay Stock Exchange Sensitive Index, or Sensex, in the past few trading sessions suggests that the stock market is entering a pre-Budget rally zone.
Market experts are unanimous that though delayed, the rally was in the offing. In the last four trading sessions, the Sensex gained six per cent, or 1,043.78 points, while the Nifty gained 6.14 per cent, or 302.65 points.
The Nifty today closed 64.75 points higher at 5,546.45, while the Sensex went up 206 points to end at 18,506.82 points.
Shankar Sharma of First Global expects the pull-back rally to extend, at least till the Union Budget on February 28. “We have had one of the worst January on record, and there is enough headroom for the Sensex to rally by another 1,000-1,500 points in the coming days,” said Sharma. Even the Nifty could only rise to 5,700 points.
Pre-Budget market rallies are typically based on expectations, and things are no different this time around. Market players expect the Budget to lay down the road map for further foreign direct investment (FDI) inflows, particularly for the much-awaited FDI cap increase in the insurance sector, and opening up of the infrastructure sector.
“After environment minister Jairam Ramesh said that we have to attract investment in infrastructure, the government may choose the route of environment clearances quickly,” said Samir Arora of Helios Capital, adding that this was also a relief rally after the overreaction witnessed in January. The Sensex had lost 16 per cent since the beginning of this year.
Amar Ambani, head of research at IIFL, said the rally fuelled by expectations from the Budget had already set in on Dalal Street. The fall in inflation numbers has only improved market sentiments further. Inflation eased to a two-month low of 11 per cent in the first week of February on moderating prices of onions and other vegetables.
K R Choksey Securities Managing Director Deven Choksey said, “The Nifty may touch 5,700 before the Budget, as valuations are comfortable. There are also expectations that the Budget will be populist.” Markets are trading 15 times one-year forward price-to-earnings multiple with a growth rate of 15 per cent.
Arora of Helios Capital said since there were supply-side issues in agriculture, encouragement may be given to investment in rural and agriculture-oriented sectors. However, he does not expect opening up of FDI in retail. But he said any excise hike may affect certain sectors.
“In the Budget, the big focus of investors would be really how the finance minister balances his books in some sense,” said Jyotivardhan Jaipuria, head of India research at Bank of America Merrill Lynch.
| STOCK MARKETS & BUDGET SENSEX | |||||
| Budget date | On Budget date | Previous day | % chg | Day after | % chg |
| 28-Feb-01 | 4,247.04 | 4,069.68 | 4.36 | 4,271.65 | 0.58 |
| 28-Feb-02 | 3,562.31 | 3,705.66 | -3.87 | 3,678.75 | 3.27 |
| 28-Feb-03 | 3,283.66 | 3,277.34 | 0.19 | 3,277.27 | -0.19 |
| 8-Jul-04 | 4,843.84 | 4,955.97 | -2.26 | 4,945.48 | 2.10 |
| 28-Feb-05 | 6,713.86 | 6,569.72 | 2.19 | 6,651.08 | -0.94 |
| 28-Feb-06 | 10,370.24 | 10,282.09 | 0.86 | 10,565.47 | 1.88 |
| 28-Feb-07 | 12,938.09 | 13,478.83 | -4.01 | 13,159.55 | 1.71 |
| 29-Feb-08 | 17,578.72 | 17,824.48 | -1.38 | 16,677.88 | -5.12 |
| 6-Jul-09 | 14,043.40 | 14,913.05 | -5.83 | 14,170.45 | 0.90 |
| 26-Feb-10 | 16,429.55 | 16,254.20 | 1.08 | 16,772.56 | 2.09 |
| NIFTY | |||||
| Budget date | On Budget date | Previous day | %chg | Day after | % chg |
| 28-Feb-01 | 1,351.40 | 1,295.55 | 4.31 | 1,358.05 | 0.49 |
| 28-Feb-02 | 1,142.05 | 1,189.20 | -3.96 | 1,178.00 | 3.15 |
| 28-Feb-03 | 1,063.40 | 1,052.95 | 0.99 | 1,058.85 | -0.43 |
| 8-Jul-04 | 1,518.15 | 1,566.80 | -3.11 | 1,553.20 | 2.31 |
| 28-Feb-05 | 2,103.25 | 2,060.90 | 2.05 | 2,084.40 | -0.9 |
| 28-Feb-06 | 3,074.70 | 3,067.45 | 0.24 | 3,123.10 | 1.57 |
| 28-Feb-07 | 3,745.30 | 3,893.90 | -3.82 | 3,811.20 | 1.76 |
| 29-Feb-08 | 5,223.50 | 5,285.10 | -1.17 | 4,953.00 | -5.18 |
| 6-Jul-09 | 4,165.70 | 4,424.25 | -5.84 | 4,202.15 | |
