Analysts recommend defensive strategy on Budget day

Our Bureau Mumbai | Updated on November 25, 2017

Though the BSE Sensex and the NSE Nifty corrected sharply over the last two days, the damage seemed to be more in the mid- and small-cap space, as most of the stocks had witnessed a relentless run up this year. Despite the recent fall, the CNX Midcap is still up about 35 per cent and the CNX Smallcap 53 per cent this year.

After the correction, what can marketmen expect on Budget Day on Thursday?

All eyes on key sectors

According to analysts, though the market is expected to be volatile in the short term, all eyes will be on the Finance Minister’s announcements on key sectors and the overall direction of the economic policies over the next five years rather than short-term pump priming specific sops for the securities market, such as a reduction in the STT.

Jayant Mangalik of Religare Securities said due to the Budget volatility would be testing higher levels on Thursday. “So, day traders should keep extra caution. It’s advisable to choose low beta counters and defensive sectors such as FMCG and pharma to avoid any unmanageable loss.”

According to Credit Suisse, other than a vague hope, there aren’t any uniform “expectations” given the fact that no one knows what the Government is working on. It means largescale disappointment is also unlikely. “We expect the Budget to be a non-event for the broader market, though specific changes, such as revisions of excise duty for cigarettes, gold import duty, or other such duty tweaks could affect specific sectors.”

Expensively valued may drag

Deven Choksey, MD, KR Choksey Shares and Securities, said the current correction in the market is part of the overall trend. “As far as small- and mid-caps are concerned, these stocks being illiquid tend to swing wildly. But while quality stocks will have an opportunity to rally, those which had run up ahead of time and were quoting at expensive valuations may drag on for longer,” he added.

B Gopkumar, Executive Vice-President and Head — Broking, Kotak Securities, said: “Whenever market is volatile, small- and mid-caps undergo correction but since they are a function of the overall market, what needs to be watched out for in tomorrow’s Budget are the four key ‘growth driving sectors’ of BFSI, power, infra and capital goods.”

According to Saurabh Mukherjea, CEO - Institutional Equities, Ambit Capital, there is no fundamental reason for the market to fall over a period of time.

Published on July 09, 2014

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