Ahead of the Budget, investors should stay with sectors which are linked to the economy such as consumption, banking, agriculture as well as infrastructure including housing.
The recent up move seen on D-Street pushed benchmark indices above their crucial resistance levels in the month of January which suggest bulls are taking the lead ahead of the interim Budget.
But, historical data suggests otherwise. Last 10 years' data shows that bears have actually dominated D-Street on 9 out of the last 12 occasions. The S&P BSE Sensex fell the most in 2016 declining 7 percent, followed by 6.1 percent fall in 2013 and 6.04 percent decline in 2011.
On the others hand, the index gave positive returns only in 3 years out of 12. The S&P BSE Sensex rallied 6.1 percent in 2018, followed by 5.8 percent gain seen in 2017, and nearly 1 percent up move recorded in the year 2010.
Finance Minister Arun Jaitley will present the interim Budget on February 1. As a part of that, vote-on-account or approval for government’s estimates of expenditure for the first four months of the next financial year 2019-20 will be presented, the Finance Ministry said earlier this month.
“We might go into the Budget this year on a neutral note, flattish returns, like the year 2010. The expectations from the Budget are high and there is monetary policy lined up in a couple of days after that,” Prasanna Pathak, Fund Manager-Equity, Taurus Asset Management told Moneycontrol.
“Expectations are high for a rate cut in the monetary policy, so the markets will continue to be in a hope-mode. Also, the market will have to adjust for the on-going earnings season which is again expected to be a mixed bag. So, to sum up, we expect January to be a flattish month,” he added.
Populist measures expected from the Interim Budget:
This is the last chance for the Modi government to introduce or build upon a popular measure which the government has already introduced. But, it looks like stars are aligned for some populist measure from the govt. in the interim Budget.
“Typically, market builds up expectations from the Budget and more often than not the expectations are not in sync with the economic conditions of the country and the market gets disappointed. This time may not be any different if we are to witness a pre-budget rally,” Naveen Kulkarni, Head of Research, Reliance Securities told Moneycontrol.
“We are expecting a full Budget this time. Ahead of the election, we may see the Budget announcing some sort of farm loan waiver, rural stimulus and ensuring a rise in minimum support price (MSP),” he said.
This is going to be a crucial Budget for the government as it offers one last opportunity to announce some important or popular measures ahead of the elections.
“We feel that the govt may use it to emphasise its commitment to the popular schemes already announced. On the expenditure side the Govt may use it for firefighting and fuelling growth and capex,” said Pathak of Taurus Asset Management Co. Ltd.
“Normal expectations include some changes in income-tax, extra deductions towards salaried class/pensioners, sops for farmers and Industry. But with Modi government, we always expect some surprises!,” he added.
Sectors to bet on:
Well, ahead of the Budget, investors should stay with sectors which are linked to the economy such as consumption, banking, agriculture as well as infrastructure including housing.
Kulkarni of Reliance Securities advise investors to stay with a rural theme which will continue to be the focus area. Similarly, the consumer sector is also likely to receive some sops from the budget.
While Pathak suggests Housing, MSME, Agriculture, and Infrastructure could be the most likely in flavor ahead of the main event. “Anything that boosts economy/consumption is good for investor we feel. The budget will try to strike a balance between populist measures, boosting economy/consumption and being investor/industry friendly,” he said.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.