I am keenly looking forward to what could be the most interesting week on the Indian stock market in a long time.
For months, a combination of unidirectional opinions, positions and movements created one of the most vigorous bull runs we have seen. The experts re-inventorised after months of fallow intellectualisation, convinced that the market would stay buoyant for five years (where people get such estimates from, God knows) and up to indices of 100,000 by 2020 (ensuring three minutes of fame for whoever put this estimate out). As an extension, people bought because the first 100 days would be magic; people bought because the Budget was going to be the seminal Woodstock of their investing lives.
Finally, people are sure and not sure, which is where the fun begins. They are sure the present government will do a Lazarus for the economy; what they are not sure is if it can transform water into something that is banned in the state where Modi comes from.
A market is at the end of the day a distillation of opinions, so like a faithful snoop I have spent the past couple of days talking to market players. The more confused I got, the better I felt; what this market temporarily needs is for all those 'we have seen the future' types to shake their heads for a change; what this market needs is bulls to lose some money to create an even contest; what we need is some market pessimism and some economic optimism (auto sales rebound-types) for a change.
So, back to what I sampled from my various conversations:
Great Budget
The finance minister has increased food and fertilizer subsidies but reduced the fuel subsidy, an excellent capital allocation strategy.
Lousy Budget
The tax consistency is completely inconsistent and even horrendous in parts.
Great Budget
If the finance minister can moderate the fiscal deficit to 3.1 per cent in two years, the savings could be used for some mega-kickstarting, making the world desperately want a piece of the India action.
Lousy Budget
The government failed to appoint pinch hitters (someone mentioned Amit Shah) to go and clean up Coal India or the Railways, which even insiders would have bought at this juncture
Great Budget
What most people have missed is how the government has altered the Plan Expenditure ratio, reversing a central-driven spending largely in favour of states, which will kickstart the economy grassroots upwards.
Lousy Budget
Indians wanted big change, best expressed through a few landmark initiatives, not small change (pun intended) of multiple Rs 100 crore projects.
So, you have diverse perspectives: Bulls saying the market could lose 200 points on the Nifty and that too by Wednesday (after which, back to Phase 2); bears saying a good 10 per cent correction will wipe off the smug headiness, restore pricing sanity and create an attractive investment opportunity in what is still a bull market.
The author is a stock market writer, tracking corporate earnings and investor psychology to gauge where markets are not headed
