If runup to Budget is about volatility, ride it to make quick bucks & how!
, ETMarkets.com|
Updated: Jan 11, 2018, 12.07 PM IST
Indian stock market has a tendency to turn cautious ahead of the Union Budget, though any effect from the same tends to be transient.
The domestic market looks jittery as the countdown to the Union Budget begins, with myriad speculations from a possible return of long-term capital gains tax on equity to a complete shift in the Modi government's focus to the rural belt and a possible slippage on fiscal deficit target.
Finance Minister Arun Jaitley will unveil the Union Budget for financial year 2018-19 in Parliament on February 1.
The December quarter earnings season, which kicks off on Thursday with analysts still unsure if the numbers can show any sign of earnings revival for India Inc, only adds to the anxiety, forcing traders and investors to take a back seat.
IT major Tata Consultancy Services (TCS) and private sector lender IndusInd Bank will report their numbers on Thursday, while Infosys will do so on Friday.
The market is going to be volatile through this earnings season, says Siddharth Sedani, VP - Equity Sales Advisory, Anand Rathi Financial Services. "Plus, the Union Budget is ahead. It will only add to volatility," Sedani told ETNow.
But it does not need to be a 20 days of no trade for investors.
Market veterans say while the market looks unpredictable for next 15 to 20 days, a stock-specific approach can still get you robust returns.
Investor should remain stock-specific at this point, and focus on quality rural-focused companies ahead of the Budget, says Sanjeev Jain, Associate Vice President of Ashika Stock Broking.
Q3 earnings will decide the market trend in the interim.
Hope of better-than-expected Q3 earnings have already taken the equity indices to lifetime high levels. The BSE Sensex scaled its all-time high of 34,565 on January 10. NSE's Nifty index is trading above the 10,600 mark for the first time ever.
"We are expecting a balanced Budget, neither purely reformist nor populist. We may see some big announcements to cheer the rural sector," said Jain.
Indian stock market has a tendency to turn cautious ahead of the Union Budget, though any effect from the same tends to be transient.
In four of last five Union Budgets, domestic equity indices did not give positive returns in the one month to the Budget. But they delivered positive returns for the month post Budget in three out of last five years.
Sedani, too, suggests a stock-specific approach. The PSU bank recapitalisation is a big positive for the market, with Parliament approvals coming in for recap bonds and equity.
"Besides, we are looking for big infrastructure spend in this Budget, which would mean a good booster from the economy from public spending," said Sedani.
Analysts and economists are expecting a fair dose of populism from the Modi government in Budget 2018, as it will the last full budget before the general election of 2019. In recent months, the ruling party has not done too well in the rural belt in key state elections.
Well-known investor Ramesh Damani says the market will continue to wade through volatility for sometime.
"Domestic liquidity remains exceptionally strong. The market has turned its focus on Q3 earnings and the Budget, is not signalling any top. We are nowhere near the top," he said in an interaction with ETNow.
Some analysts say Jaitley will turn his focus on the rural belt in this Budget, as the government may try to deliver on its 2014 election promise to double farm income in the country. The focus on infrastructure development may still continue, as the capex-starved economy will need a fair bit of public economy with keep the engines of growth working and cater to the huge demand for jobs in a country, where youth below 35 constitute 60 per cent of the population.
Rakesh Tarway, Head of Research, Reliance Securities said, "We expect the government to bring a announce of measures to provide a further boost to rural economy by means of higher allocation towards MGNREGA and micro irrigation funds, better coverage of Fasal Bima Yojana beyond 40 per cent, among others. This will not only help stimulate rural economy growth, but also drive rural consumption and in turn benefit sectors like consumers, building materials and white goods."
Analysts say infrastructure and rural-focused stocks can be sureshot bets to deliver good returns in the Budget bargain.
"We expect companies in the agro, FMCG, infrastructure development, building materials and railways sectors to be biggest beneficiaries of the forthcoming Union Budget," said Tarway.
Finance Minister Arun Jaitley will unveil the Union Budget for financial year 2018-19 in Parliament on February 1.
The December quarter earnings season, which kicks off on Thursday with analysts still unsure if the numbers can show any sign of earnings revival for India Inc, only adds to the anxiety, forcing traders and investors to take a back seat.
IT major Tata Consultancy Services (TCS) and private sector lender IndusInd Bank will report their numbers on Thursday, while Infosys will do so on Friday.
The market is going to be volatile through this earnings season, says Siddharth Sedani, VP - Equity Sales Advisory, Anand Rathi Financial Services. "Plus, the Union Budget is ahead. It will only add to volatility," Sedani told ETNow.
But it does not need to be a 20 days of no trade for investors.
Market veterans say while the market looks unpredictable for next 15 to 20 days, a stock-specific approach can still get you robust returns.
Investor should remain stock-specific at this point, and focus on quality rural-focused companies ahead of the Budget, says Sanjeev Jain, Associate Vice President of Ashika Stock Broking.
Q3 earnings will decide the market trend in the interim.
Hope of better-than-expected Q3 earnings have already taken the equity indices to lifetime high levels. The BSE Sensex scaled its all-time high of 34,565 on January 10. NSE's Nifty index is trading above the 10,600 mark for the first time ever.
"We are expecting a balanced Budget, neither purely reformist nor populist. We may see some big announcements to cheer the rural sector," said Jain.
Indian stock market has a tendency to turn cautious ahead of the Union Budget, though any effect from the same tends to be transient.
In four of last five Union Budgets, domestic equity indices did not give positive returns in the one month to the Budget. But they delivered positive returns for the month post Budget in three out of last five years.
Sedani, too, suggests a stock-specific approach. The PSU bank recapitalisation is a big positive for the market, with Parliament approvals coming in for recap bonds and equity.
"Besides, we are looking for big infrastructure spend in this Budget, which would mean a good booster from the economy from public spending," said Sedani.
Analysts and economists are expecting a fair dose of populism from the Modi government in Budget 2018, as it will the last full budget before the general election of 2019. In recent months, the ruling party has not done too well in the rural belt in key state elections.
Well-known investor Ramesh Damani says the market will continue to wade through volatility for sometime.
"Domestic liquidity remains exceptionally strong. The market has turned its focus on Q3 earnings and the Budget, is not signalling any top. We are nowhere near the top," he said in an interaction with ETNow.
Some analysts say Jaitley will turn his focus on the rural belt in this Budget, as the government may try to deliver on its 2014 election promise to double farm income in the country. The focus on infrastructure development may still continue, as the capex-starved economy will need a fair bit of public economy with keep the engines of growth working and cater to the huge demand for jobs in a country, where youth below 35 constitute 60 per cent of the population.
Rakesh Tarway, Head of Research, Reliance Securities said, "We expect the government to bring a announce of measures to provide a further boost to rural economy by means of higher allocation towards MGNREGA and micro irrigation funds, better coverage of Fasal Bima Yojana beyond 40 per cent, among others. This will not only help stimulate rural economy growth, but also drive rural consumption and in turn benefit sectors like consumers, building materials and white goods."
Analysts say infrastructure and rural-focused stocks can be sureshot bets to deliver good returns in the Budget bargain.
"We expect companies in the agro, FMCG, infrastructure development, building materials and railways sectors to be biggest beneficiaries of the forthcoming Union Budget," said Tarway.
