The S&P BSE Sensex has fallen more than 3 percent points in the run-up to Budget 2021. The Nifty50 is also trading near crucial support levels of 14,200 after hitting a high of 14,753 earlier in January.
The market was overheated and overbought, and some profit-taking ahead of the Budget 2021 was on the cards.
A dip in the market has now given retail investors who were waiting on the sidelines an opportunity to invest in the run-away rally seen in the last 12 months.
Investors should use the opportunity to get into quality stocks or stocks that are likely to get positively impacted by Budget proposals.
“With the budget date nearing, markets have gotten cautious and have shed some of its gains this week. Investors should look at this as an opportune time to assess companies and invest in quality stocks on dips. Traders can go light on the long side,” Umesh Mehta, Head of Research, Samco Group told Moneycontrol.
“With the Budget touted to be in favour of infrastructure development and focus on stimulating economic activity further, Infra, Realty and Banks would be sectors which will be watched by investors for new opportunities,” he said.
The Union Budget comes in the backdrop of an unprecedented pandemic that has global ramifications. Extended support from central bankers across the world supported sentiment and fuelled the risk-on rally.
“Valuations are not cheap anymore. Markets are anticipating a continued strong recovery in economy and businesses in the year 2021, while the macro environment is expected to also remain favourable globally, the thesis could get tested in H1 of this year,” Kunj Bansal, Business Head, PMS - Equity - Karvy Capital Ltd told Moneycontrol.
“The pent-up consumer demand could moderate and an increase in public expenditure would be required to support the pace of economic recovery. However, we remain constructive on equities in the medium term and would look at correction as an opportunity to accumulate quality companies,” he said.
Bansal further added that the set-up is favourable for the start of a new business cycle and the earnings growth trajectory could be much better than anticipated over the next few years.
GDP numbers suggest that we are in a technical recession, but things could reverse very quickly without giving much time or opportunity for investors to react.The IMF on Tuesday projected an impressive 11.5 percent growth rate for India in 2021, making the country the only major economy of the world to register double-digit growth this year amidst the coronavirus pandemic.
“The government is expected to limit the fiscal deficit to 7 percent of GDP, despite higher expenditure and lower revenues for this fiscal. Yet, the economic recovery has surprised pleasantly and is set to turn positive in Q3 FY21 itself after the massive decline of 23.8 percent in Q1 FY21,” Sharekhan said in a report.
“We believe that it is imperative for the Centre and states to continue with counter-cyclical fiscal measures to sustain the momentum of the recovery. Hence, the government may maintain its focus on the development of infrastructure (roads, water, and affordable housing) that would give the economy a much-needed earnings/employment stimulus,” it said.
The report further added that further extension/granularity of PLI schemes to spur manufacturing might also be announced in the Budget. “There could be some initiatives to support urban poor especially form the disruption in the MSME sector. Infrastructure, Real Estate, Construction, and Railways are some sectors, which may be in focus in the upcoming Budget 2021,” it said.
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