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Pre-budget rally will ride on divestment, reforms in infrastructure

NetScribes/Neeta Kolhatkar

BUDGET 2001

The pre-budget stock market rally has begun. A section of the domestic brokerage houses, foreign institutional investors and mutual funds NetScribes spoke to say there are high expectations from the Union budget, with a stronger focus expected on infrastructure and the divestment programme.

While refraining from pegging a level for the Sensex, marketmen are of the view that the upside for the Sensex should be another 350-400 points. However, if the budgetary announcements do not meet market expectations, the Sensex could dip to the 3800 levels.

Deepak Agarwal, Associate VP, Kotak Securities said, "A consolation to the market is expected only with specific plans and announcements related to infrastructure. An announcements in long-term infrastructure projects would be a good boost for the market," he said.

Infrastructure-related scrips like steel, cement capital goods sectors will perform well." he added, "These stocks are already quoting way below their fundamentals and any good budget sops will only add to their value."

Anand Tandon, associate V-P, ASK Raymond James, argued that in the current context India will command a stronger weightage amongst Asian markets. "The IT valuations are looking better. I do not expect the budget to provide us with major surprises. In those terms the markets may not get bullish as there is no clear economic direction for the country. What will be key for India is infrastructure financing and streamlined collection and distribution channels."

Jamshed Desai, technical analyst with Taib Securities, says, "The market can touch the 4600-4800 levels if the government capitalises on the bullish sentiment. Divestment will be the key again. And this time around, we would look for specific divestments in any of the PSUs like Air-India, Hindustan Zinc and Maruti."

He added, "Once the fiscal deficit is capped, then the FIIs will be overweight on India as in the last three months."

The market attributes the current run to the pre-budget rally that takes regularly before the budget with high expectations running in the market.

A senior portfolio manager with Asit C Mehta brokerage said, "With major power companies leaving India or threatening to leave like Enron, this is not good news for the market. The single factor that can attract FIIs is FDI inflows to the country, and specifically in the infrastructure sector."

He is confident that FDIs can revive the market and put it back on high bullish tracks. "In case the budget is lacklustre, the market will decline and here the levels are as low as the 3800 range."

Desai said, "Investors are negative on Zee, HLL, Mahindra & Mahindra, Bajaj Auto and Telco. However tech stocks will certainly look up after the current correction."

Looking ahead, tax reforms are another area, which will need to be looked at in detail. "Corporates are willing to pay taxes, but the system should be made less complicated and certain excise reforms are required to attract more investment."

Desai added that the government needed to also concentrate on the revenue collection means if reforms in excise are required.

According to Aparna Nirgude, SBI Mutual Fund, "The corporate results have been strong. The current market trend is of a sentiment turning positive after the December volatility."

According to pure technicals, the BSE Sensex posted an intra-week low of 3491.55 during the week ended October 20, 2000. The Sensex bounced back from here and rallied to a high of 4332.65 during the week ended December 15, 2000.

The Sensex has closed above the psychologically and technically important level of 4200 today and is expected to test the 4400 level barring resistance from the 200 Day EMA that is currently placed at 4306.

The weekly oscillators are also in buy mode and supporting the current move, indicating that the Sensex could appreciate further from these levels.

Budget News

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