Budget next trigger; market to remain range bound: Experts

Sudarshan Sukhani, s2analytics.com is advising traders to take short positions intra-day, and convert them into positional shorts if the Nifty stays below 5950.

Traders must understand that these are choppy times and market can do anything.
Dipan Mehta, member BSE and NSE, says the Budget could act as a trigger or support. He expects the market to rally in the run-up to it, because of the FM's positive remarks.
Also read: Govt likely to miss FY13 fiscal deficit target: Fitch arm Below is the edited transcript of his interview to CNBC-TV18. Q: NTPC OFS has been fully subscribed. What would you do with that one?
A: NTPC is a good utility or company to own, last quarter performance was quiet decent. It is a steady performer, a bit of a defensive. Company will keep on adding a little bit of a capacity every year and going forward as more reforms take place in power and coal sector, NTPC will be the beneficiary. The valuation is also quite attractive. It is a stock for investors who have little less appetite for risk and make it part of the core holding and it will act as a defensive. I think it remain as a market performer at least from this point onwards. Q: What's the call on the market per se? Do you see it significantly correcting because we have gone below 5,950 or do you think it is likely to remain a bit sluggish and subdued?
A: Large issuances which have taken place have been one part of the problem. Now, NTPC issue is also done and hopefully after this issue the disinvestment target looks near - and there maybe one more company to go to reach the target and with the success of the disinvestment program, I think local institutions maybe less inclined to sell stocks.
In last 2-3 months, Foreign Institutional Investor (FII) buying was matched by domestic institutional selling. And maybe the balance will tip in favour of the FII buying from this point on that's what we expect and if we work on that assumption then maybe this kind of sluggishness may last for a week or so and one could then again see the markets improving from this point on.
Also, I think the Budget coming towards end of February could act as trigger or a support for the market because we do expect the markets to rally into the Budget considering that the noises, which the FM has made are quite positive.
And although, nothing major is expected from the Budget it's just an event that people look forward to and if the FM is able to convince the markets that the fiscal deficit will be kept under control and subsidies will be managed then it will have a very positive effect and one could see more FII flows also coming through because that’s one uncertainty, which investors want to get over and done with. Q: How do you think the market has read the Central Statistical Office (CSOs) FY13 GDP estimate of about 5 percent?
A: It is a very disappointing number and the only positive one can make out of it is the fact that maybe the Reserve Bank of India (RBI) be more reluctant or convinced to go in for another rate cut in the next policy meet because it does confirm that the slowdown is quite deep and some corrective action needs to be taken.
Hopefully, by then the Budget would be out of the way and we would have one or two more maybe diesel price hikes, some clarity could come on fertiliser subsidy and food subsidy. On the whole, all eyes are on the government how they will manage their finances going forward. It will be a big question because we will have election next year so some amount of spending will take place towards the end of this calendar year as well.
So, that's the big number to watch out for even from RBIs viewpoint. So, if the finance minister is able to convince that the fiscal deficit, subsidies are kept under control and administer prices are in fact going to move up then the picture will significantly improve and one could see the markets taking that in that stride and start to trade upwards. Let us wait and watch how things evolve over the next two three months. Q: How would you approach names likes Titan Industries, Jubilant Foodworks etc? Would you buy them on every dip or do you think that the industry is going through a structural downturn at this point in time rather than a cyclical one?
A: I do not think they are going into a structural downturn. I think the base effect is finally catching up and the economic environment is not significantly improving. So it is more challenging for them to maintain their top-line and bottom-line growth.
Per se, the best strategy rather than buying at dips is to try and liquidate it marginally at every rise and reduce their overall exposure or percentage of the portfolio and maybe focus more on some of the cyclicals, banking shares, private sector banks, pharmaceutical companies or some of the other sectors, even real estate which have been performing sectors and where the quarterly numbers have been better than Street expectations.
The consumer-oriented stocks per se one cannot be completely out of them and from time to time I think one would need to adjust the exposure to these companies depending upon what the other available opportunities are in present the market, because most of them are in a secular growth situation and they are still in the growth phase. Q: Do you track VIP Industries and what are you making of this quarter after quarter disappointment from this company?
A: We don't track it that closely but the performance has been deteriorating over the last two to three quarters. One doesn't know exactly when the turnaround will take place but by and large I was a bit surprised that the street was expecting the company to come out with better set of numbers because there was no such indication otherwise.
These are typically small cap companies and there is a lot of volatility in their earnings and single product company so one has to live with this kind of risk and maybe three four quarters down the line the company could show fantastic results as it did couple of years ago. So, these are volatilities which investors need to account for. Q: For the rest of the February series what kind of downside do you see for the market itself? Do you think it could slip well below 5,900 or do you see this range to remain?
A: I think the markets will be more range bound. I think the Budget is an important event and markets will not sell-off before the Budget big time. And thereafter, all will depend on how actually is the Budget. The nearing of the Budget will act as a support for the market and one could expect some pre-Budget buying to take place over the next few trading sessions.
So per se, one should expect range bound market and recovery as the series goes by and then after the Budget depending upon what the proposals are. If there are no major tax increases, the fiscal deficit number is well under control then one could see that acting as a trigger for the market to breakout of this range hopefully on the upside.