Brokerages anticipate pleasant surprises in Budget, bet on rally

Brokerages anticipate pleasant surprises in Budget, bet on rally
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First Published: Fri, Feb 29 2008. 12 12 AM IST
Updated: Fri, Feb 29 2008. 12 12 AM IST
Mumbai: After a three-day pre-Budget rally, the Bombay Stock Exchange’s (BSE) benchmark index, Sensex, ended little changed on Thursday, a day ahead of the Union Budget, even as analysts are betting on a rally on the Budget day.
The “lack of hype” around the Budget this year “will help spring positive surprises,” said Lalit Thakker, a director of retail brokerage Angel Securities Ltd in Mumbai.
The Sensex closed at 17,824.48, down 1.51 points or 0.01%, and traders are not surprised with the way the index moved on Thursday as in five out of the last eight occasions, it had ended with losses the day before the Budget.
But this time around, the mood could have been different as the Economic Survey 2007-08, a report on the country’s macroeconomic fundamentals for this fiscal year, promised “policy initiatives” by the government to support the equity market and said India would continue to attract “significant” portfolio investments. It even said in the short term, high returns and low risk will make India an attractive market for global investors.
“There is vast difference between market and macroeconomic outlook,” said Shankar Sharma, joint managing director or First Global Stock Broking Ltd, a domestic brokerage.
“There is not great expectation from the Budget,” said Sailav Kaji, head of derivatives trade at Mumbai-based brokerage Pioneer Investcorp Ltd.
Apurva Shah, head of equity research at domestic brokerage Prabhudas Lilladher Pvt. Ltd, also said the mareket’s “expectations (on the Budget) are moderate.” According to him, the odds of a short rally in after the Budget are fairly high because of the current bearishness on expectations.
India Infoline, in a client note on Thursday, said it expects “lots of Budget-centric activities” in various sectors in terms of “sops and subsidies”.
Any positive development or sentiment boosters for the investors are likley to get amplified while any negative cues could be brushed aside by the market. “We expect the market to move up tomorrow,” Thakker of Angel Securities said.
Trading on Thursday also coincided with the expiry of derivatives contracts for February. According to Kaji and India Infoline’s derivative analyst Rajiv Verma, around 60% of February contracts were rolled over to March. “Since the market was in a bearish mood for the entire month, only those investors who took short positions at lower levels, sitting on losses, carried forward their position,” said Verma.
The volume in the derivatives market has drastically fallen since mid-January. Open interest in the futures and options market, including single stock futures, index futures and options, which was more than Rs90,000 crore mid-January, is now around Rs56,000 crore.
Foreign institutional investors were net buyers of Rs1,352.06 crore in the derivative segment on Thursday.
In 2007, Sensex had lost more than 1.2% or 170 points on the day ahead of the budget. It posted losses on the day ahead of budget in 2007, 2005, 2004 (vote on account), 2002 and 2001. and gained in 2006, 2004 and 2003. When it comes to the budget day, it gained and lost four times each.
Ashwin Ramarathinam also contributed to this story
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First Published: Fri, Feb 29 2008. 12 12 AM IST