The Hindu Business Line : `Lesser chance of post-Budget sell-off now'

Shankar Sharma, Chairman of First Global, states that the chance of a post-Budget sell-off is reduced now. He believes that issues related to service tax will be crucial and adds that no changes in service tax would be positive.

First Global believes that the upside on the cement sector is capped. Notably, it is extremely negative on the real-estate sector. Excerpts from CNBC-TV18's exclusive interview with Shankar Sharma:

The fact that we have been flat to weakish in February - does it reduce the chances of a post-Budget sell off somewhat?

Yes, absolutely. That is exactly what we have been thinking. Typically markets go counter to their pre-Budget trends and typical pre-Budget trends are bullish which is why, on 80 per cent of the occasions, you do see market sell-off.

But this time, it is on the other side, which means that perhaps the market doesn't have many expectations - or at least not many positive expectations. So to that extent, there is scope for some positive surprise and hence a positive move from the market post-Budget, that is exactly what our sort of line of thinking is, given the last few days in the markets.

What could upset that applecart? Do you expect anything major in the Budget that could make it look very positive or negative?

Budget is not something that we spend a lot of time speculating on prior to anyway because clearly we have no inside track on policy.

So to that extent we like to react rather than be proactive on the Budget provisions.

From our perspective, the issues relating to service tax will be very central overall but what I read in the papers is that there may not be any rise there, which will be a positive.

We can only hope for absence of negatives, given that most policy announcements now come intra-year rather than just on Budget day. As long as the Finance Minister maintains that, I feel Budget-wise it will be okay.

Market-wise, that is a different angle altogether and that will have its influence from inflation and interest rates and those two angles are clearly not looking good. The Budget will have some role to play but not a whole lot.

Is there anything that could see extended pressure from here? You talked about interest rate sensitives, real estate for example, and I believe you have turned a bit circumspect on cement as well?

If you look at cement, the consumers of cement are all interest-rate sensitive sectors, so it is unlikely that they will be as willing as they had been in the past to absorb price increases.

Our take is that you are not going to see much price increase on the cement side unless and obviously the input cost changes and there is some slim possibility that might change as well.

So you are looking at a pretty much cap upside on cement and we think the downside risk definitely does exist from hereon in terms of cement.

What about real estate?

On one of your shows 2-3 months ago, we had mentioned at that time, obviously the euphoria was a lot more than what it is now, that real estate was clearly, apart from banking, the most interest-rate sensitive sector and given a view on interest rate, which has been that they are headed up in the last 3-4 months, we have been on that side.

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