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Informist, Monday, Jul 22, 2024

By Anjali Singh

MUMBAI – The benchmark indices are expected to be volatile on Tuesday, with the Union Budget for the current financial year expected to lend cues. The market expects the government to announce populist measures while being fiscally prudent and to focus on policies related to taxation and consumption.

A correction is possible even if the Budget is in line with expectations as the market is "heavy" as of now, said Pankaj Karde, president and head of institutional equities at Asit C. Mehta Investment Intermediates. He said the movement will likely be sideways if it does not correct.

Some believe that even if the government falls short of expectations, the market won't see a sharp correction. While frothy valuations could lead to periodic corrections, India's strong macroeconomic fundamentals, including robust economic growth, likely slowdown in inflation, and good corporate earnings growth could provide a strong foothold for the market.

Anita Gandhi, whole-time director at Arihant Capital Markets, believes the market is fairly priced as the liquidity and inflows are strong. Analysts advise investors to keep their positions light and wait for corporate earnings before making decisions.

Some market participants expect some subsidies on agriculture and focus on employment for the lower-strata to boost consumption.

The Economic Survey for 2023-24 (Apr-Mar) today showed India's agriculture sector has grown at an annual average rate of 4.18% in the last five years, and remains critical for the country's economic growth. Even though India is a major agricultural producer, crop yields in the country are much lower than other producers globally. "That this is so despite the fact that the bulk of the government support goes to rice and wheat is a cause for reflection," according to the survey. The sector has an 18.2% share the country's GDP at current prices, the survey said.

"This budget is probably going to be more consumption-focused, with a stronger focus on lower-class and rural households. It is also highly predicted that social spending in both rural and urban areas will increase, and that lower income slabs may receive tax breaks," Aamar Deo Singh, senior vice president of research at Angel One, said in a note today.

Analysts expect some changes in policies related to taxes in the Budget, with likely deductions in the personal tax expected to be taken positively. Any reduction in capital gains will come as a relief, said Karde.

Today, the Nifty 50 and Sensex closed 0.1% lower each at 24509.25 points and 80502.08 points, respectively. Going forward, support for the Nifty 50 is seen at 24200 points while the index will likely face resistance at 24800 points.

Talking about the frothy valuations, Ajit Mishra, senior vice president of technical research at Religare Broking, said that some pockets are neutral, while sectors like defence and railways are on the higher side. Railways, roads, and infrastructure-related stocks will be in focus as the government is likely to maintain its policies for these sectors.

Investors should also look out for railway-related stocks such as Jupiter Wagons, Karde said. These sectors rose significantly after the General Elections, which renewed hopes of policy continuation and agendas of the Bharatiya Janata Party-led government. However, all the positives are priced in, Mishra of Religare Broking said. The market also expects some more incentives for affordable housing in the form of higher allocation or interest subsidies.

Corporate earnings may lead to stock-specific reactions. Nifty 50 constituents Hindustan Unilever and Bajaj Finance are scheduled to announce results on Tuesday. Bajaj Finance's consolidated net profit for the June quarter is seen rising 17.3% on year to 40.33 bln rupees on strong growth in assets under management. Emkay Global Financial Services expects a marginal improvement in the company's overall net interest margin and fees, led by removal of the Reserve Bank of India's ban on two of its key customer acquisition products, 'eCOM' and 'Insta EMI Card'.

Similarly, price cuts are likely to boost demand for fast-moving consumer goods major HUL and help the company report modest growth in volumes, leading to a slight increase in sales. HUL's net profit for Apr-Jun is expected to rise 3% on year to 25.48 bln rupees. Despite expectations of muted earnings growth, shares of HUL have gained recently on expectations of some support from the government that could drive rural demand. The stock has risen over 10% so far this month.  End

Edited by Ashish Shirke

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