Few Words on Market – 090217
090217: The interim budget proved to be a total non event disappointing the market sentiment and yet again puncturing the recent attempt by the market to move up. It’s usually a vote-on-account by the government but the same got termed as interim budget by the media and investors as there were huge unrealistic expectations attached with it this time. There were expectations of large scale sops which did not happen leading the indices tumble deep in the red. The interim budget proved to be pure vote-on-account.
The interim budget presented by the government was nothing but a report card of it’s achievements over the last five years. It was an opportunity missed by the government to send a message to the electorate that it was serious on tackling with the current recession. Though expecting something big from the vote-on-account is practically unrealistic considering the short span of life left in the government, some announcements could have been made which could have boosted the sentiments of both individuals and corporate’s.
Key announcements like reduction in fuel prices, concessions to realty, and removal of fringe benefit tax could have led to immediate more spending, which would have supported the economy to a certain extent. Even now the government can work with RBI and cut interest rates further. The recent sharp decline in inflation rates and a negative IIP number of manufacturing sector warrants an immediate step to make money cheaply available. May be we see a rate cut in days to come.
We will witness high level of political drama in days to come. The elections are most likely to be between mid April and May first week in five phases. This clearly means market will be within a tight range till such time as there would be complete freeze on economic policy front. We have been writing here since many months about the range and a time correction, hopefully both will come to an end once a new government, either BJP led NDA or Congress led UPA is in place. Any third kind of experiment will ruin the sentiments.
Nothing much has come out of the Satyam scam till now. Many investors are buying the stock expecting a hefty price on take over and a revival on takeover. Buying at the current juncture could be a wrong decision as the final value of assets and liabilities are not yet known. The re-instatement of accounts can take six months as per the new auditors. Hence how can a bidder know the correct value of the company? The other top three technology companies have not shown any interest in buying Satyam though being in the same sector. If there was so much worth then why is Infy, TCS, Wipro sitting quite? What is the value other bidders have found in the company which these companies have missed?
Satyam & Maytas must have had large scale favoritism by top notches in Andhra government. Common sense says how can a company bag 30000+ crore projects? Hence Mr.Raju was advised to surrender to police on a Friday (Sat & Sun being court holidays). SEBI is the most competent body to investigate the case and must be given complete freedom to do so. But expect this only after elections, as it will have implications on the electorate if involvements of certain people are proved.
The GDP expectations are falling but they still look extremely good compared to other Asian countries. The next government should announce large scale infrastructure spending programs which can actually stimulate the economy. Expect Sensex to trade in the range of 8500 to 10500. Index funds as suggested last month delivered 8 – 10 percent returns and same can be achieved again if we buy at 8500 levels and below on every dip. Some investors called and expressed support on the views mentioned on ULIP’s in the previous issue. We thank them all.
Disclosure:- It is safe to assume that the author may have interest in the sectors recommended in this news letter. Seeking personal advice from your Financial Advisor is recommended before acting on any of the substance given herein. The numbers, figures, etc., presented may have been taken from various sources.