Budget to power markets' bull run further

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SME Times News Bureau | 21 Jan, 2021
The bull run in India's equity market will last at least till the Union Budget FY22, even as the barometer index S&P BSE Sensex mounted the 50,000-level mark.

Accordingly, the Union Budget FY22 is widely expected to be expansionary in terms of massive stimulus spending to aide the economy's faster recovery.

Even positive global cues such as a massive stimulus plan being proposed by the new US administration under President Joe Biden and the ongoing global vaccination programme are seen as solid signs by investors to hold on to their current positions.

In fact, a faster-than-anticipated macro recovery has remained intact. It has been supplemented by the vaccine roll-out programme.

Consequently, market participants' expectations have soared, especially of healthy Q3 results.

Other factors such as an abundant global and domestic liquidity as well as rising consumption trend will continue to power the bull run.

Notably, the FIIs are expected to continue pumping up the never ending bull run during the unusual pandemic period.

Till now in the fiscal, they have pumped in Rs 2,38,527 crore or $32.15 billion. Analysts across the board opined that such a scenario was visible during last several month.

The search for a decent 'RoI' has brought these FIIs to India's shores even in December. Earlier, the lockdown induced market crash led to cheaper valuations which attracted foreign investors.

"Post the forthcoming Union Budget we may witness a temporary brake to the uptrend and further upmoves from hereon will depend on the pace of economic and corporate earnings growth and the trajectory of inflation and interest rates in India and the world," said Deepak Jasani, Head of Retail Research at HDFC Securities.

According to Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services: "This trend is likely to last as expectations of better Q3 results, company's outlook commentary and the build up to Budget will boost both Nifty and Sensex to new highs."

Besides, India Inc is widely expected to come out with healthy third quarter results on the back of higher-than-expected sales during the festive season.

"If the recovery in growth and corporate earnings, currently underway in India, gathers momentum, the markets may further surprise on the upside. But it is important to appreciate that the market is overvalued from the short-term perspective," said V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

"At high levels, the market is vulnerable to a correction. Investors can utilise the current euphoria to get rid of low-grade stocks from the portfolio."

Furthermore, S. Hariharan, Head of Sales Trading, Emkay Global Financial Services said: "We expect strong margin expansion for consumer facing companies, as efficiency gains and savings on A&P spends continue to drive earnings. Moreover, a strong festive season has driven sales growth well above earlier expectations. Hence, the consumer universe can be expected to deliver more than 20 per cent earnings growth."

"Financials would also benefit from RBI standstill on NPA recognition and deliver strong PPOP (pre-provision operating profit) growth as credit costs remain contained to lower than expected levels."

Additionally, millions of new investors into the country's stock markets are also expected to usher-in another round of a buying spree.

"A major portion of these investors are first time investors and have realised that investing in stock markets can be rewarding," said Gaurav Garg, Head of Research at CapitalVia.

"This might change the way they used to treat investing and a significant chuck of savings can get into financial markets which otherwise was going to other financial instruments like FDs, RDs, Small Saving Schemes etc."

As per SEBI data, close to 6.3 million (63 lakh) new Demat, or dematerialised, accounts have been opened during the April-September 2020 period, representing an increase of 130 per cent on a year-on-year basis.

The total count of DMATs stood at 44.46 million, with an average addition at 1.05 million investor accounts per month during the Apr-Sep 2020 period.

At present, volatility induced via profit booking is seen as a buying opportunity.