Budget won't move mkt; buy education, irrigation: Kotak Sec

Excerpts from Closing Bell on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Nifty BSE | NSE 31/05/12 Are Mutual Funds betting on Nifty?

Q: What are your thoughts on sugar as a space? Is there anything that looks appealing there?

A: Sugar has had a huge run up in anticipation of firm sugar prices. Clearly there are companies now doing QIPs in that space but I think the scarcity of sugar and a possible lesser production of sugarcane this year is also being factored in into the stock prices right now. The minimum support price (MSP) is also known right now. A lot of the positives are already there in the prices. The inventory gains in sugar companies are also getting factored in right now. So I am really not sure - unless the international sugar prices start marching upwards - we will not see too much of an upside in sugar stocks right now from these levels.

Q: The two possibilities in the market's mind right now are: good budget - will rally, moderate budget - will not sell off too much. What will look like a shocker in the budget?

A: The fiscal deficit number will be important to look at because it will have an impact on the bond yields and hence it will also have an impact on the banking stocks. The sequence is something one has to track. Disinvestment number is also something that has to be looked at because this is one of the ways in which the government would raise resources for social sector or infrastructure spending or any stimulus which is it intends to give. The resource mobilisation of the government is also to be watched out. These are two factors to really look at in the budget. Which way will it head to? It all depends on the mood in the global markets as well as what really is expected during that point in time.

If we close somewhere here itself and the government comes out to be positive in terms of fiscal deficit or for that matter what it intends to do for infrastructure and it is far more clear in terms of what it intends to do in the next couple of quarters, then, I think, it will be mildly positive but I'm not sure whether there will be drastic moves because of the budget per se.

Q: There is still a long list of them to go, what is the market mood about the rest of the qualified institutional placements (QIPs) that need to go through. Will get done, you think?

A: What the markets are getting slightly worried about is the clustering of QIPs and clustering of QIPs in the same sector. Even if, in a week, you have two-three QIPs, the markets are still ready to absorb but this week, we saw bunching up of QIPs post the successful Unitech QIP. Bunching up of QIPs is not a great sign because that leads to a feeling that is the QIP mania were to crowd out liquidity for the secondary market. That is something that proves to be a dampener for sentiments in the secondary markets itself. If the QIPs are spaced out in different sectors, there will still be appetite for various companies provided they are doing it at proper valuations and keeping money on the table for investors even in the near to medium term.

We are also seeing initial public offerings (IPOs) beginning to roll on. So the QIP, IPO and the government IPO, it will be a lethal combination that has to be balanced delicately and rather than going ahead in a haphazard manner and raising as much as you can in the shortest possible while, one has to see in the next two-three months, how this process unfolds.

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It is safe to assume that my clients and I may have an investment interest in the stocks/sectors discussed.