See Nifty in 150 points range on Budget day: Tata Invest

Despite the market seeing a disastrous day, Amit Dalal, executive director, Tata Investment, is confident that it will not see a big correction on Thursday, when Finance Minister P Chidambaram will announce the Union Budget 2013-2014. The Nifty today closed at 5761.35, down 93 points.

"I do not think we will see more than a 150 point Nifty upward-downward movement. During the day, one may see volatility based on the announcements for the Budget, but towards the closing of the day, I do not think there will be a major negative sell out beyond this," believes Dalal. Dalal is also hoping the overseas markets, that have seen a selloff now, will stabilise soon.

Dalal is maintaining a positive stance on the Union Budget. He believes the Budget will give a little more confidence for the next year. "It will not be something that will make one feel as if the government has lost its ropes towards keeping this economy on a growth path," he adds. Below is the edited transcript of Dalal's interview to CNBC-TV18.
Q: What happened in the market today? Is it disappointment from the Rail Budget or expectations of nothing coming through in the Union Budget?
A: Like all markets that tend to catch a trend, especially a downward trend, today was a day which was a culmination of both. Maturity of the highs, the huge sell-off in the global markets, disappointing Q3 results and the fact that there is perhaps less to expect in terms of what one can get from the Budget; all these put together have brought the 100 point correction in the Nifty. One has to understand, a 100 point correction in Nifty may seem like a lot because we don’t see this kind of volatility nowadays. However, this kind of volatility has been a substantial part of our history. Therefore, one should not take this as something that is not completely out of the ordinary. Q: What is happening with the broader market? In the past couple of days it has just been a complete freefall for a lot of stocks where even the fundamentals do not warrant it?
A: If you go back through the full rally which we saw from October to December or maybe even from September to December, there were two factors which were always considered, which were very surprising, One, it was a very polarised rally. A large number of stocks were not participating. It is not a secular rally like we saw in the past and therefore those sectors which were underperformers were very sharp underperformers even in the rise. Therefore, the money went into the HDFCs and Sun Pharmas of the world. However, one did not see capital move into higher risk environment of fundamentals.
The other thing was that domestic market was not participating at all, be it in the form of mutual funds, or retail market direct participation. It was always negative. So, when the backbone of the midcaps was not available, the correction led to this huge broad-based market selling off even faster. One should also not forget this very unhealthy trend that has permeated into our system of promoter funding. I find that product extremely dangerous to the banking system and the Non-Banking Financial Companies (NBFC) system. However, it has definitely become a very big part of capital market and that tends to create its own problems and the market goes down. Q: The market is now inching towards a 2 percent cut. One wonders whether this is just a short-term downtrend that we are seeing or is it a complete reversal of the up trend that we have seen in the market up until now. What is the sense that you are getting? Is this a free fall kind of a market? Or do you see a base getting built at somewhere around this 5600-5700 level?
A: We have this huge event in front of us, so let’s focus on the Budget. The fiscal deficit number and the assumptions which bring that fiscal deficit number will be very important. The revenue expectations in terms of taxation too will be widely watched. People are going to go deep into these numbers this time. One can’t just say that he/she expects 25 percent direct tax growth without the right benchmarks which are required for it.
Secondly, the amount the government is now allocating towards states for implementation of goods and service tax (GST) will be interesting. That roadmap is something that people will be looking forward to and the roadmap can only be in terms of allocations of subsidies or allocation towards the states for their losses that takes place because of GST. I would also look very strongly to see whether we are going to continue with the 50 paise diesel hike. If that is going to break down, that could be a big problem in the future. So, those assumptions are very important to me Q: What is your expectation in terms of Thursday's trade in particular? We have multiple number of cues which we will be reacting to on Thursday itself. There is expiry, the Budget, GDP data, etc. How volatile do you think the markets could be?
A: Considering that we've already had a selloff, let's assume that we have a stable market tomorrow at these lower levels. I do not think we will see more than a 150 point Nifty upward-downward movement. During the day, one may see volatility based on the announcements for the Budget, but towards the closing of the day, I do not think there will be a major negative sell out beyond this. Barring that, there is no major selloff in the overseas markets. If the overseas markets, who have now seen a selloff to some extent stabilise, I do not think the Budget will be a big negative. If at all, I think the Budget will give a little more confidence for the next year. It will not be something that will make one feel as if the government has lost its ropes towards keeping this economy on a growth path. More to come.