The finance minister has already outlined the broad contours of Budget 2013 and since there is no surprise element left, Vikas Khemani of Edelweiss Securities doesn’t see a structural rally in the market once the event plays out.
"While it can be a good Budget, there may not be fizz in it. There will be positive bias towards the market post Budget, but I do not see a structural rally coming through because the market is already trading at a fair valuation," he said in an interview to CNBC-TV18.
Below is the edited transcript Vikas Khemani’s interview with CNBC-TV18
Q: What is your broad sense of the Budget? We know the constraints that the finance minister has. We know that he has made these promises. So, if he were indeed to deliver a 4.8 percent fiscal deficit number for FY14. Will that be reason enough for the market to cheer? How do you think the market will respond?
A: On lighter note, the Budget would be like cola, which has been open for a long so while it is a good Budget, but there might not be a fizz in it. The finance minister has already outlined how the Budget is going to pan out or what the broad contours are going to be.
Now investors would look for the final details of the Budget in terms of how much of allocation has been done to the social spending, what happens to tax etc. The finance minister is likely to present a credible Budget.
So, the Budget might be more like reinforcement of what he has been saying and people would draw comfort from that. We could see some roadmap relating to structural reforms like goods and services tax (GST). One will also be watching what he does to push or to increase investment activity in the economy.
Q: Would you go long into the Budget and if so what stocks or sectors?
A: We have seen market correcting ahead of the Budget and it is consolidating right now. If the Budget is broadly in line and slightly more favourable towards the economic growth, then there will be muted rally post the Budget.
Given the fact that there is no surprise factor left, I don’t think we will see a big market rally taking shape after the Budget. There will be positive bias towards the market post Budget, but we will have to see what comes out of the Budget.
I do not see a structural rally coming through because we are seeing the market trading at fair valuation. All the measures will take time to pan out in terms of corporate earnings and economic growth coming back.