Markets Wait For The Union Budget To Make Directional Move
Just as a movie buff awaits eagerly for Friday to get a dose of entertainment in the cinema hall, the market enthusiasts this Friday are waiting anxiously for the release of the first budget of Modi 2.0. If we look at the headline index, the Nifty has registered a gain of about 1.3 per cent during the week (up to Thursday). However, the power of the bulls have not been so strong. The market participants are looking askance at the lack of intent of the bulls in the market, akin to the lack of killing instinct among some of the Indian batsmen in the death overs of the 'World Cup'. The major news which got the ball rolling for the bulls at the start of the week was that Xi Jinping and Donald Trump agreed to a ceasefire and return to negotiating table.
With the lack of intent of the bulls called into question, let us examine how the market set-up has been from the interim budget till the full budget. In the year 2009, between the interim budget and the full budget period, the benchmark NSE Nifty 50 index delivered a spectacular return of 46 per cent, while in the year 2004, during similar period, the Nifty delivered a double digit return of 25 per cent. In the current year, the benchmark has clocked a single digit gain of around 9 per cent. Many investors may argue that the returns may not be as attractive as compared to the previous two instance, but remember that this year has been a year full of surprises. Markets have dealt with a number of concerns, which include liquidity crisis faced by the financial sector, economic slowdown, geopolitical tensions and escalating global trade war. In spite of all these headwinds, markets have managed to deliver a very promising return. Now that most of the concerns are a thing of the past and a stable government is at the helm, the government has a free hand to push for economic reforms. Therefore, the future prospects for the markets continue to be appealing for investors over the long term.
Meanwhile, the US markets have registered record closing highs as expectations grew that the Fed would take a more dovish stance as a batch of largely disappointing data provided enough evidence of a slowing economy. The European markets also looked strong as the nomination of the current IMF Director, Christine Lagarde, a known advocate of easy money policy, as the successor to Draghi, whose term expires in October, is seen as continuation of the policy of the ECB. Additionally, the US President Trump has also nominated two governors to the Fed board who seemingly have one important thing in common— both are known advocates of easy money policy. These two developments bode well for global liquidity and growth.
The market may go into the budget day with its head held high as it has managed to clock four consecutive days of gains. But a look at the performance of the market in the past between the period of the interim budget and the full budget suggests there is not much enthusiasm among the market participants ahead of the budget for 2019-20. Post-budget, the near-term movement is likely to be driven by the earnings season, as IT bellwether TCS will kick-off the earnings season among the major companies. We urge investors to keep a close tab on the upcoming earnings and make a list of stocks that are exceeding their earnings estimates and showing good growth in their revenues, margins and, more importantly, providing a promising forward guidance. Further, you need to screen the stocks and rebalance your portfolio with new charms, which could add glory to your wealth.
