Volatility likely to grip the market for some more days

The Budget fell short of expectations of giving the intended stimulus which could put the economy back on the high growth path and immensely disappointed capital markets as LTCG and STT were not touched. Tinkering of individual income tax rates with features of foregoing exemptions and deductions has instead of easing, complicated taxpayers.

The government has not realised that ground reality is a lot worse on economy slowdown and the need of the hour was to recognise the issues at hand and transparently deal with them. Personal income taxes being cut do not make a substantial difference to consumption.

The fiscal deficit number was largely in-line with market expectations but the plan to reduce the fiscal deficit for the next financial year by LIC IPO was something which shook investors' confidence say market players.

After a "disappointing" Budget, the onus is squarely on the government to ratchet up its spending, particularly on infrastructure projects that have strong multiplier effects on economy. The government will now have to do much on structural reforms and provide capital to the system to engineer a quick turnaround.

Near term trend will be dictated by changes in budget proposals during Parliament discussion over Union Budget, Q3 results, domestic macro-economic data, FII and DII activity, the movement of rupee against the dollar, crude oil price movement and global cues.

Coronavirus outbreak fanned fears about global economic growth US markets witnessed its steepest one-day loss since August 2019. Unlike corporate earnings or economic data, the long-run impact of the virus is trickier to measure for many investors and analysts, injecting even greater uncertainty into markets say global investors.

It could get worse before it gets better. For the week ahead, chartists predict trading range of 39000-40500 and 11400-11950 for the Sensex and the Nifty respectively.

Short-term trend is weak and is likely to continue for the next few trading sessions. The 11,875 level should be the immediate hurdle for the Nifty and breach of the same could extend correction up to 11,500- 11,350 levels.

FUTURES & OPTIONS

Union Budget 2020 triggered "crash" in the markets, derivative segment continued to witness brisk and volatile trading. True to warnings in this column, "Hope" rally in the markets fizzled out during the week ended.

In coming week, traders should remain very cautious as far index is concerned as volatility is likely to grip the market for some more days. Expect stock specific action on the back of ongoing result season and news driven activity from Union Budget.

Issues in real estate, automobile and telecom services remained unattended in the Budget, despite the severe stress in these sectors. Sector-specific measures like providing more liquidity and one-time restructuring of loans were not addressed for real estate sector.

Specific suggestions like an incentive-based scrappage policy, hasn't been considered for automobile sector. For telecom sector there were no announcements made regarding the rationalisation of levies and taxes currently imposed on the severely distressed telecom sector.

Avoid these sectors for present.

Weathering the Budget carnage, Technology stocks were the few ones that traded in positive territory. Buy on declines TCS, Infosys, TechMahindra and HCL Tech. Punters advice buying in defensive sectors like Pharma and FMCG. Buy on declines Asian Paints, Adani Power, Dabur, Infratel, GMR Infra, TechMahindra, Divi Labs, Sun Pharma and Ujjivan Finance.

(The author is a stock market expert. He is former vice chairman of AP Planning Board)