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Last Updated : Jan 30, 2013 10:39 PM IST | Source: CNBC-TV18

Budget 2013: Budget next trigger for market; Nifty range bound

The BSE Sensex today closed the day almost flat at 20005.00, up 14.10 point. The Nifty also ended the day almost flat.


The BSE Sensex today closed the day almost flat at 20005.00, up 14.10 point. The Nifty also ended the day almost flat.  


Sudarshan Sukhani of s2analytics.com, says that the Nifty has been rangebound. But the bias for the Nifty remains on the long side. The Nifty is in a trading range, but the trading range has not broken on the downside. So, it is possible that instead of going through a correction, the market is moving sideways. A market that corrects sideways is giving us a bullish signal.


Meanwhile, Sanjay Sinha of Citrus Advisors, says that the market behaviour for most parts of January indicates that the broader market has experienced a bout of profit taking. If the Budget meets the expectation of the market sentiments then we are in for some good time, otherwise market could see some more profit taking beyond that.


Also read: Better enjoy market rally while you can: Marc Faber 


Below is the edited transcript of his interview to CNBC-TV18.


Q: What is the prognosis according to you? With the RBI policy out of the way what is the next trigger before the Budget that the market could watch for? Do you think it is just going to be a slow grind up until then?


A: Market behaviour for most parts of January indicates that the broader market has experienced a bout of profit taking. It got masked by the strident performance of some of the large caps, particularly from the IT and the oil and gas sector, so we did not saw much correction in the Nifty or the Sensex. But midcap index performance month-to-date is flat to negative.


With the RBI policy event over this is a very crucial phase for the market and we also have the F&O expiry tomorrow. If the market is able to hold onto its levels in the next couple of days, then we are set for a slow upward move for the market leading up to the Budget.


Otherwise, profit taking bout might get a little more serious between now and the Budget and we may see the market as a whole correct, individual stocks also experiencing that profit taking before the expectations leading up to the Budget start building up and then we see the rally build up. If the Budget meets the expectation of the market sentiments then we are in for some good time, otherwise market could see some more profit taking beyond that.


Q: What is your opinion with regards to how exactly earnings have performed from the broader markets and how would you extrapolate it in terms of earnings possibly for the rest of the year?


A: As far as the earnings downgrade is concerned, the worst is probably over. Infosys is the best example which took almost every analyst by surprise. We also saw fairly impressive results by other large cap stock like Reliance. We experienced the same in many of the midcap companies, but the experience is more mixed.


I think the economic environment is now improving and with the interest rate cycle turning downwards the outlook for the midcap companies has now become stronger than what they were for the last one year. So going forward, I would expect the earnings momentum to give the fillip to the stock price correction that was experienced by the midcap companies. We saw that for calendar year 2012, the midcap index ends up outperforming the large cap index.


I think this trend will accentuate more in the calendar year 2013 of course with bouts of profit taking that will keep happening. But the overall universe of midcaps should deliver a much better performance in 2013.


Q: What is your opinion with regards to the reaction that we saw post the monetary policy yesterday? Equity markets ended down after that intraday spike that we have seen. What do you think was the key disappointment with regards to the RBI monetary policy if there was one, according to you or do you think that it was just possibly factored in?


A: I do not think the RBI policy disappointed. When we started the month the expectation was that the RBI would be far more assertive with the rate cuts and it would be front-ended and we may get a 50 bps cut in January policy, but that was a minority opinion. Many expected a 25 bps cut and that expectation was tempered when the RBI governor gave statements which were fairly hawkish. In that backgroundm getting 25 bps cut on repo rate and another 25 bps cut on Cash Reserve Ratio (CRR) in my opinion surely met the market’s expectation.


But, I think the market had already factored that into its levels and we had seen some price movement preceding the RBI policy. Since the broader market was anyway experiencing a round of profit taking I think this became a catalyst for the profit taking to become more widespread. So I think we should see the RBI’s policy and the reaction of the market on the day of the policy in that context only.


With close to about Rs 20,000 crore net inflows coming from the foreign institutional investors (FIIs) in the current month and with the main indices going up by about 3.5-4 percent in the month, I think we have seen the liquidity as being one of the important factors which has kept the market at the current levels.


So I still believe that the next couple of days are little important from the short-term perspective of the market, because if the market is able to hold onto these levels with the strong liquidity that they have got and with the profit taking now charging up the speculators once again we will see a rally on a ascendant cycle right up to the Budget, otherwise we might probably experience a profit taking for sometime and despite that we will again see a build up leading up to the Budget.


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Q: What would you do with a couple of these accidents that have taken place, the likes of Crompton Greaves etc. and how would you approach them now?


A: Not just that particular stock, but most of the infrastructure stocks also have not delivered on expectations even though we were bullish on infrastructure once the government got on the front foot as far as policy is concerned. The first meeting of the Cabinet Committee on Investments (CCI) which will take place has significance both for the infrastructure stocks as well as PSU banking stocks, because there are close to Rs 132,000 crore worth of projects which are stuck in various red tapes whether it is Environment Ministry or other ministries.


So if the CCI come up with fairly strong set of decisions on many of these projects then it will give a fillip both to the wider majority of the infrastructure stocks because it would be seen as the onset of putting into effect what has been stated in words. When RBI announced the policy yesterday, it mentioned that the government has done a lot to improve the market sentiment, but not enough to do much on the ground.


So the clearances of these projects could have a significance there and with a significant amount of bank funding tied up to these projects which are stuck, once these get cleared this would also give a fillip to the banking stocks which are not performing well since last few days.


Q: In the recent part a couple of the fundamental analysts and guests who have come on the channel have reiterated that positivity with regards to IT as a pick in 2013. What is your view with regards to IT and how would you be placed in terms of possible earnings as well going forward?


A: Earnings of large IT companies both Tata Consultancy Services (TCS) and Infosys have taken everybody by surprise. But I have a guarded outlook on the IT sector for 2013. I believe that the sector will have to deal some headwinds of the rupee appreciating and volume growth not being impressive. National Association of Software and Services Companies (NASSCOM) even now has not revived its growth expectation from 11-14 percent. In that background I would expect this sector to at best be a market performer and we have probably seen the rally in this sector being more front-ended and they may not necessarily participate in the later part of the year when the other sectors would probably be outperforming.


 



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First Published on Jan 30, 2013 04:41 pm
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