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market outlook: After solid Budget rally, wait for some adverse action to deploy fresh money

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It was a historic week for the Indian market, with the equity indices recording the biggest-ever ‘Budget Day’ gain in absolute terms and the best-ever Budget week gain in 10 years . The power-packed week started off with an ‘all-round development’ Union Budget and concluded with various forward-looking RBI policies. The market wholeheartedly cheered the various reforms announced, with Bank Nifty seeing the best one-sided rise since the pandemic.

Although this momentum is momentary, since most of the positives have already been factored in, the fact is that the Budget truly aims to revive growth in the economy by letting go of the fiscal deficit limits. This Budget also made it clear that the government’s intentions are bold and it wants to free up the markets to create wealth and go for more privatisation and asset monetisation.



Furthermore, a capex-intensive and infra-led boom is expected to provide the much-needed buoyancy to the economy, which was punctured by the pandemic. With this as the central theme, the government tried to put the money back in the hands of people through real asset creation rather than simply doling out free cash to the citizens as done by the developed economies to revive slouching growth.

All in all, the Budget certainly appeased the majority in the markets with its growth-inclined vision and expenditure plans. Investors must keep a close eye on quality names from the cement, heavy industrials, insurance and PSU sectors with a long-term horizon, as they would be prime beneficiaries of the reforms announced in this Budget.

Event of the Week
The MPC also complemented the Government of India’s aspirational agenda for growth by keeping the repo rate unchanged while continuing with its accommodative stance. In order to supplement a massive government borrowing programme, RBI introduced some breakthrough decisions, one of which will allow retail investors to directly invest in G-Secs online.

This would entail that RBI will now compete with other banks to attract retail savings deposits. Moreover, markets cheered the expectation that inflation will be well within the band of tolerance soon. This orchestrated easing of liquidity to support the structurally weak sectors is also a welcome move. All these reforms portray the combined effort of the government and RBI to instill confidence and growth in the market and the economy to continue the bull run.

Technical Outlook

Nifty50, which formed a big bearish candle last week, has made an even bigger green candle during the week gone by, as the bulls are in no mood to give the bears control of the market. The overall market breadth remained positive as risk-taking sentiment prevailed after the Budget Day. Other global equity indices, including emerging market ones like Kospi, TAIEX and DAX, are all trading near all-time highs while the risk-averse asset classes like gold and bonds are exhibiting weakness. We suggest traders to maintain a bullish bias with an immediate support on the downside at 14,580 on the Nifty.

W36ET CONTRIBUTORS

Expectations for the Week

After the gung-ho week, the culmination of important events may mark a breather for the market from the excess optimism and the indices may adjust to the corporate numbers lined up for the coming week. A lot of growth expectations has already been factored into the market, and short-term corrections would be a part and parcel in the journey ahead. Banking stocks have had a dream run, which is one of the best in recent history, and are therefore worthy short-term profit booking candidates. Commodity prices, except oil, are cooling off, and that may consolidate the metal sector going ahead.

The auto sector, too, is mired with a lot of optimism. However, sequential growth in sales is seen topping out and one needs to be cautious in this space. Smallcaps and midcaps might still have some steam left. Nonetheless, market participants should focus solely on quality names as the indices have already run up quite a bit. One should remain invested in quality stocks and wait for a decent knee-jerk reaction to add fresh money.

Nifty50 closed the week at 14,924, up 9.5 per cent.

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