Budget expectations

Finance Minister Arun Jaitley

The benchmark indices were fairly range bound last week and though we had two big movement days where on one they gained and another they lost, they ended virtually flat for the last week.

All eyes are on the budget which Finance Minister Arun Jaitley will present. Pic/AFP

The BSESENSEX lost 5.59 points or 0.02 per cent to close at 25,099.92 points while the Nifty lost 2.65 points or 0.04 per cent to close at 7,508.80 points. The broader indices like the BSE100, BSE200 and BSE500 gained 0.27 per cent, 0.90 per cent and 0.72 per cent respectively.

The BSEMIDCAP and BSESMALLCAP had a stellar performance and were up 2.71 per cent and 2.67 per cent respectively. The sectoral gainers were led by BSEHEALTCARE up 4.09 per cent, BSECONDUR 3.91 per cent and BSEPOWER 2.47 per cent. The losers were few but BSEFMCG was down 3.15 per cent. Other losers included BSEOIL&GAS down 1.11 per cent and BSEMETAL down a tad at 0.33 per cent.

Stocks
In individual stocks the gainers were led by Bajaj Auto up 6.16 per cent. Stocks from the pharma and IT sector were gainers and included Ranbaxy up 6.31 per cent, Lupin 4.90 per cent, TCS 4.89 per cent, Dr Reddy 4.67 per cent and HeroMoto 4.09 per cent.

The losers were led by FMCG major ITC down 4.78 per cent. Others included Infosys 2.83 per cent, Reliance 2.41 per cent and Cairn India 2.36 per cent. The benchmark indices were certainly flat but the rest of the market gives you a picture which is different and certainly closed positive.

There were four pieces of news where the government decided to defer the gas price hike by three months and also rolled back the suburban railway fare hike to 14.2 per cent similar to other passenger fares. Today would also be a critical day for Reliance as SAT (Securities Appellate Tribunal) delivers its judgement in the insider trading case.

The third was the government extending the excise duty cuts proposed in the interim budget by another six months. This gives credence to the expectation that though the budget would be tough on account of the precarious financial health of the economy, the government would be pro-manufacturing and would offer stimulus to produce more.

FIIs have turned cautious and bought equities worth Rs 237.64 crores in the week and have bought shares worth R 10,860 crores so far in the month of June. Domestic institutions were buyers of shares worth Rs 1,503 crores for the week and Rs 2,317 crores for the month so far. The Indian rupee appreciated Rs 0.09 or 0.15 per cent to close at Rs 60.09. Then Dow Jones closed at 16,851.84 points, down 95.25 points or 0.56 per cent for the last week.

The June series expired at 7,493.20 points a gain of 257.55 points or 3.55 per cent over the previous month. This week would be driven by events in Iraq where the army is now fighting back and its morale boosted by Americans and their drones joining in. Though they have not joined the fight, their presence itself is acting as a morale booster. The union budget would be presented on July 10 and expectations would be the key for the market.

Upcoming
CII, one of the industry associations, held four seminars in the city of Mumbai last week covering sectors like Retail, FMCG, Real Estate and Mutual Funds. The turnout at these events clearly indicates the confidence which is slowly but steadily returning to various stake holders.

The mutual fund summit clearly saw that almost all stakeholders are of the view that domestic investment into our equities and capital market are a must and India must not be dependent on the FIIs for the movement of our markets.

We have a very healthy savings rate but that is not being channelised to the markets. Even the introduction of the Rajiv Gandhi Equity scheme which was good in intent failed to deliver simply because it was a poorly drafted scheme. Changes were made and SEBI has made further recommendations to see that the retail investor is attracted to the markets.

The markets have been trading in a range and consolidation around the 7,400-7,600 range in the Nifty. This is a healthy sign and more than welcome. It is also pertinent to note that the two sectors which were on the receiving end for quite some time namely the Healthcare and IT sectors have bounced.

So much so that the BSEHEALTHCARE has made a new lifetime high and two of its stocks like Lupin and Sun Pharma have also made their lifetime highs. Ever since the rupee had begun to appreciate, these sectors have been losing. TCS was another stock to make a lifetime high. This is on its own strength as Infosys lost during the week and is way of its high of Rs 3,846 and is currently at Rs 3,222.

The markets are certainly in a period of consolidation and waiting direction from the budget which is a mere nine trading sessions away. The budget will certainly be favourable for industry as they have to provide and create jobs. What is good for industry is certainly even better for the capital markets. Use dips to buy stocks with fundamentals, and a piece of advice simply ignore "SMS" giving free advice.

Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd. Readers are invited to read more about these and other issues on his website https://ak57.in

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