Budget session has brought a welcome correction in the equity markets. The correction that commenced with the presentation of Railway budget got accentuated with the presentation of General budget. However, the budget of the Union govt. cannot be blamed for the debacle. As mentioned in my last post the markets had run up ahead of fundamentals and were ripe for a decent correction. Unecessary hype was created in the run-up to the budget, disregarding the fact that the FM did not have enough leverage to offer any fresh sops to the stock market. The markets have reacted with a negative view on the budget, although the budget does not contain any major negatives for the markets. The lower GDP figures for Q3 have added to the markets woes.
The speculative positions in the market have been cut, in the backdrop of the unrealistic expectations not having been met by the FM. As indicated by me earlier, markets have corrected to reasonable levels and would consolidate around 5600 levels on the Nifty (18500 on the Sensex). According to me these levels are decent levels to accumulate good stocks with a one year perspective and with reasonable expectations of a 15% return by next budget. As speculative positions get cut, the ownership will slowly get transferred into safer hands, which augers well for the future of equity markets.
We must remember that the current budget has been presented in trying circumstances, and the FM must be congratulated for not dancing to the gallery in the election year. The most important aspect of the budget is the resolve towards imposing a pragmatic approach towards fiscal consolidation. If the FM can curb the Fiscal deficit, everything else will fall in place. This augers well for the future of equity markets. Investors are advised to put money into equities now, and wait patiently for markets to consolidate around the current levels for a while. The next major cue for the markets will be the FY 12-13 results of India Inc., which will start flowing in from the middle of April 2013.
