SEBI's net short circular is an unsung hero, keeping markets steady: Feroze Azeez

Experts predict heightened volatility between 11 am and 1 pm during the Budget speech.

For a market grappling with relentless FII selling, small and mid-cap turbulence, and budget-day jitters, one might have expected a sharper meltdown. Yet, the Nifty has held firm—no single-day drop of 5 percent amid the recent meltdown. Feroze Azeez, Deputy CEO of Anand Rathi Wealth Limited, believes there’s one unsung hero behind this resilience: SEBI’s net short circular.

"I thank the Lord every night for that circular," he said in a conversation with Moneycontrol. Introduced just before the COVID-19 lockdown, this rule ensures that speculative attacks remain in check. "This is why we don’t see the kind of brutal, cascading sell-offs that still happen in the S&P 500 or the Nasdaq even though gradual corrections are still possible."

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Heading into the budget, Azeez notes that key market players—retail investors, DIIs, and FIIs—have gone light on their positions. FIIs or foreign institutional investors have mostly exited small caps, while index fund FIIs have held their ground. Small-cap fund inflows, a key sentiment indicator, remain steady, with Rs 350 crore coming in just yesterday. Meanwhile, retail investors haven’t dumped their holdings—unless forced by margin calls. This lighter positioning, he says, skews the market reaction more toward the positive in the short term.

Among sectors, Azeez is watching transport, defence, and rural development, given their prominence in government spending. Fund managers are expected to favour banking and automobiles, with banking looking particularly attractive due to India’s flat yield curve. "Any economic boost or rate correction could make banking the biggest beneficiary," he adds, noting that with banks comprising 27 percent of the Nifty, a reversal in FII positions could spark a rally.

Also read: Budget 2025: Five measures that could trigger a post-Budget rally

Markets have opened in the positive in the morning, extending gains for a second session in a row. At about 10:20 am on the budget day, the Sensex was up 206.99 points or 0.27 percent at 77,707.56, and the Nifty was up 58.55 points or 0.25 percent at 23,566.95. About 2,260 shares advanced, 876 shares declined, and 109 shares unchanged.

Experts predict heightened volatility between 11 am and 1 pm during the Budget speech. However, if capital gains tax remains unchanged, a post-Budget rebound is likely, as markets have not seen a pre-Budget rally this year.

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