Bullish run likely

Time for the investors to buy aggressively whenever there is a technical fall

After fluctuating both ways widely and wildly, the unusual six day long eventful stock market week ended up 130 points. The last minutes' jump in banking stocks on Saturday's post budget trades helped the Indian stock markets not only from sliding below the previous day's and previous week's closings but also lifted other select pivotals smartly to recover from early losses suffered following disappointment arising out of the budget presented by the Union Finance Minister Arun Jaitely. The market men had built up huge long positions on hopes of big-bang reforms and also huge increase in threshold limits for individual tax payers besides a significant cut in the subsidies being given by the government. However, the Finance Minister offered none of these and instead, raised excise duty across the board and also increased service tax burden from the present 12.36 per cent to 14 per cent, leaving nearly no Indian citizen from being under its net.

It was an eventful week. The budget session of the parliament commenced on Monday and then Railway budget on Thursday coincided with the end of the account for February series of derivative trades. On Friday, the Finance Minister presented economic survey followed by his second Budget for 2015-16 the next day. Sensex shed 256 points on Monday driven by opposition parties’ firm stand in parliament against reforms and the settlement issues. A technical rally of 33 points in next two days did not help the market sentiments. The premier index tanked 261 points on Thursday on account of lackluster Railway Budget. The economic survey, however, lifted the Sensex by 473 points on Friday, but the index was still in red by 11 points on weekly basis.

It was a roller-coaster ride for the markets during the special session on Saturday, the Budget Day. Markets rose initially and then fell when the Finance Minister finished his budget speech giving an impression that the budget is negative for the markets. But before the session ended, most of the banking company stocks jumped up, resulting in a 143 points rise.

What made the banking company stocks jump up and also help the entire market to rally from the day's lows was a realisation that the budget is not all that bad, as was initially thought. In fact, it is a hugely comprehensive and constructive budget which has also provided a road-map for the future years' growth. Announcing jail terms for black money offences is a huge positive as it will curtail black money circulation. Tax saving incentives for individual tax payers, allocation of Rs one lakh crore for road construction, earmarking Rs 8.50 lakh crore for farmers in the next four to five years and life insurance of Rs 2 lakh at a premium of only Rs 12 are wonderful ideas.

The visa on arrival proposal is yet another boost to tourism in India as it will now be extended to the tourists from 160 countries from the present 62 countries. Increased tourism is sure to help hospitality business besides increased demand for tourist taxis and services of guides and thereby enhance employment potential. The FM also promised 62 per cent of revenues to the states, putting the onus of utilisation of funds prudently and fruitfully on them, a highly positive idea. The finance minister also proposed to reduce the corporate tax to 25 per cent in the next four years from the present 30 per cent. The implementation of GAAR is postponed for yet another two years which is likely to send positive message to the foreign investors.

Thus, there are many other positives in the union budget and the same are expected to help the Indian stock markets remain in overall pink of health and if the next monsoon remains satisfactory, the BSE Sensex could be expected to reach a high of 35000 or even more, by the coming Diwali festivals.

Therefore, it’s time for the investors to buy aggressively whenever there is a technical fall in the markets. It would be advisable to buy only those scrips that have been going up in the last few months or the ones that might start looking up from the next week onwards following the budget. It would also be advisable to pick up stocks from mid-cap and small-cap segments as these are the ones that go up more than the best-known ones in a bullish market.

By: Talakshi Gosar