In an interview with Ashwini Kunder of myiris.com, Vijay Singhania, Director, Trade Smart Online opined, 'Higher savings to be exempted in budget. Major thrust should be on infrastructure, road, electricity, rural sectors including agri & rural education.'
1. The pre-budget rally has already begun with the return of foreign institutional investors. Where do you see Sensex and Nifty levels?
Cash Nifty & Sensex reached a level of 8,997 & 29,844 respectively (intraday) on first day of Feb contract month. Thereafter it gave a good correction of 50% of last run (8,957-8,102 = 855 x 50% = 428) and cash nifty came to a level of 8,526. It started going up again showing the bullish sign.
Nifty and Sensex should go up further and test the last high. Higher level of India Vix also confirms that. But it has a very strong resistance at that level. Beyond that, post budget for a short period the market should further correct. However in the longer run market depends on the budget.
2. Do you think the market valuations are reasonable?
P/E ratio of Nifty (trailing earnings) as on Jan.30, 2015 was 22.48 which, due to poor results of Nifty companies increased to 23.33 for the same cash Nifty at 8,809. P/E at the level of 23.33 is high and little risky. So the valuations are a bit on a higher side.
3. What are your expectations from the upcoming Budget?
Based on our analysis, news and discussion with eminent persons, we are of the view that :-
> Budget should be middle class friendly. Higher savings to be exempted more allowance for medical expenses, more children education allowance to be exempted. Basic exemption limit may be increased.
> Some rebalancing / restructuring between custom duty and excise duty is expected so that domestic industries get a boost
> Major thrust should be on infrastructure, road, electricity, rural sectors including agri & rural education etc.
4. Which sector you would prefer in the run-up to the Budget?
IT, Banking and Pharma should perform better. Pharma is a bit defensive stock and either side movement would be limited.
5. Is Indian economy growing at faster pace as suggested by re-based GDP numbers?
The Govt. has changed the base year to 2012 and now it is claimed that we have higher GDP numbers. Nigeria also did so. While the new numbers suggest that the economy has rebounded last year but it has confused many economists.
Both CPI & WPI inflation have come down but IIP data is not so encouraging. Rupee has stabilized, more on account of falling Crude. Foreign exchange reserves have also increased a bit. Banks are flushed with money but they are afraid of lending on account of NPA. So there are mixed indications. Important things is that analysts are feeling that the new Government is acting towards right direction and this should result in higher growth in the near future.
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