Market has corrected more often in the run-up to budget: Amrapali Aadya

Mr. Abnish Kumar Sudhanshu, Director & Research Head, Amrapali Aadya

During earlier instances broader market has corrected more often in the run-up to budget. The story is somewhat different this time on the aftermath of demonetization there a strong budget stimulus hope which is fueling the pre budget rally. We foresee, more investment in roads, ports, railways and rural infra such as irrigation and electrification. Further government to work on benefits of spanning taxation for individual and may be direct cash transfer to boost the stalled consumption. A short in the arm is channelization of money into equity linked product as other assets such as FD return is falling on the back lower interest rate cycle and hit in real estate due to cash ban. Data shows ever since demonetization took place Domestic mutual fund are driving force for market and they have almost absorbed the selling off FII, who sold nearly 30000 crore.

Though the firm trend is set to continue but one need to cautious, a sky high expectations can leads to a post budget correction if the budget proposals are short of expectations. Given the limited avenues to stimulate the economy Fin Minister faced a herculean task where he had to neutralize the demonetization impact and take social measure going to state polls were his party has major stake.

The benchmark Nifty index ended the week on a positive note, gaining 300 points or 3.5 per cent. This gain has significance on many grounds. First, closing near the weekly high shows bullish trend is still intact and 2nd the market has reclaimed the 8600 mark from where all the selling started.

We expect a softer opening on the cards on Monday as traders unwind some of their longs at the closing hours of Friday and volatile trading going ahead. Budget is full off market moving news about various sectors and companies which turn into volatility. Till the time budget is tabled i.e., on 1st Feb market will consolidate in a capped range between 8500 – 8700.

Source : Equity Bulls

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