"If the Budget does end up surprising the market positively, then we should see some more steam in this rally. Otherwise, we are in for some correction or consolidation," adds Sinha in an interview to CNBC-TV18.
In the run up to the Budget, the market seems to be taking a cautious approach, feels Sanjay Sinha, founder, Citrus Advisors. He says the market has modest set of expectations from the big event. "If the Budget does end up surprising the market positively, then we should see some more steam in this rally. Otherwise, we are in for some correction or consolidation," adds Sinha in an interview to CNBC-TV18.
Further, Sinha feels that this consolidating phase of the market might get over for the high-beta stocks and then the large cap index and therefore he expects the high-beta stocks including the real estate stocks to do much better running into the remaining part of calendar year 2013.
Below is the verbatim transcript of Sanjay Sinha's comments on CNBC-TV18
Q: Do you think this Budget can spark off a big rally or extension of this rally for this market?
A: The market seems to be slightly apprehensive in the run up to the Budget because we have seen a phenomenal close to Rs 40,000 crore of net inflows from the foreign institutional investors (FIIs) in the first five-six weeks of the calendar year.
The global markets particularly Dow and Nikkei have been at their all time high or at least at their five year high. In that kind of background with the positive noises, coming out from the government front. For the Indian market not to be reacting seems to be suggesting that the market is fearful that the Budget might contain some provisions that may change the sentiment which at least have been ruling positive for sometime. No doubt, on the sentiment front, the Budget will be a great impact on the market.
At the same time, on the more fundamental level, the fears on the current account deficit, on the fiscal deficit and also on the inflation moderating, these fears are something that are quite widespread now, Reserve Bank of India (RBI) mentioned that in their last policy. We have seen the index of industrial production (IIP) numbers showing that even on the consumption front we now have a de-growth.
Overall, the market is approaching the Budget with a modest set of expectations or with some apprehensions. So, if the Budget does end up surprising the market positively then we should see some more steam in this rally. Otherwise, we are in for some correction or consolidation.
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Q: What would amount to a disappointment for the market from the Budget? Would it come in the form of higher taxes for the corporate space or something else? Do you think it will be market specific?
A: Market is quite apprehensive on two counts. One is the talk about an inheritance tax that has been surfacing on and off. I think market feels that would be negative. The intention to tax the rich at a higher rate is not going to cheer people who are participating in the market because the larger volumes in the market does get created by people who would be in that tax bracket. These two things on the tax front would be a negative. Thirdly, if the government does some tinkering with bringing some more areas into the tax ambit, there is now a talk about introducing the commodity transaction tax. So, these things would be negative for the market.
Q: Is the rally done on high-beta spaces like real estate after events of yesterday?
A: Not really. If you ignore the stock price performances of the oil and gas stocks and the IT stocks in the month of January, the broader market has been experiencing a very wide or a very sharp correction throughout the last six weeks and in that correction the real estate stocks had stood their ground for sometime.
The unpleasant development of yesterday did trigger some correction there, but this phase of consolidation might get over for the high-beta stocks first then it gets over for the large cap index and therefore running into the remaining part of calendar year 2013, I would expect the high-beta stocks including the real estate stocks to do much better.LIVE NOW... Video series on How to Double Your Monthly Income... where Rahul Shah, Ex-Swiss Investment Banker and one of India's leading experts on wealth building, reveals his secret strategies for the first time ever. Register here to watch it for FREE.