Mavens see benchmarks falling 3-5% in a month

Indian markets are likely to see a spillover of Saturday’s budget day blues into the new week and thereafter as the perceived lack of measures to stimulate the economy appears to have dashed investor hopes of a rapid economic recovery.

The Sensex and Nifty could drop by 3-5 per cent in a month, according to the majority of those polled in an ET survey of 22 money managers and heads of research at various brokerages conducted after the budget. Besides, China’s coronavirus outbreak continues to cast a shadow on the global markets.

Most poll participants are more sanguine about market prospects by December, with 45 per cent of them forecasting the Nifty at 13,000 at year-end, about 11 per cent above Saturday’s close of 11,662 points.


Bharti Airtel, ICICI Bank, Infosys, Larsen & Toubro and State Bank of India are the top largecap picks of money managers. Among mid and smallcaps, they are bullish on Bata India, Kalpataru Power, Repco Home Finance, Siemens and Supreme Industries.

The special session on Saturday saw benchmark indices posting their biggest budget day decline in a decade. Apart from the apparent lack of stimulus measures, the budget also left long-term capital gains tax on equities untouched. It had been widely expected that this would be scrapped. Monday’s session may see the market fall as much as 1-2 per cent in extension of the slump on budget day.

Attention will also be on the Chinese markets, which are reopening after the Lunar New Year break that was extended on account of the coronavirus outbreak. There will also be wider participation from foreign investors in the local markets compared with Saturday. Finance minister Nirmala Sitharaman had pointed out that not all sections were present in the market on Saturday, usually a holiday.

The ET poll showed 67 per cent expect the benchmarks to fall in the next month with the budget failing to strike a bullish tone with market participants. Nearly half those polled rated the budget five on a scale of one to 10. Around 17 per cent rated it four, 12 per cent gave it six and 17 per cent rated it seven. The disappointment was reflected in benchmark indices — the Sensex dropped nearly 1,000 points, or 2.4 per cent, to 39,735.53 and the Nifty declined 318 points, or 2.7 per cent, to 11,643.80, eroding Rs 3.5 lakh crore of investor wealth.

“The global market trend, particularly in emerging markets, is nervous due to the economic impact caused by the spread of coronavirus. The budget has only aggravated the selloff further,” said Rajat Rajgarhia, CEO of Motilal Oswal Institutional Equities. “The markets were expecting more consumption boost in the budget. Shifting the incidence of DDT (dividend distribution tax) from companies to individuals will see a rise in taxation for promoters. LTCG (long-term capital gains) withdrawal was widely expected.”

‘NOT ENOUGH MEASURES’
About 78 per cent said the budget did not have enough measures to revive the economy. Economic growth in the September quarter had fallen to a six-year low of 4.5 per cent.

“Markets are disappointed that the budget did not have enough measures to stir up the economy or select crucial sectors — that was the need of the hour,” said Mahesh Patil, CIO (equity) at Aditya Birla Sun Life Mutual Fund.

With the budget disappointing, there’s little reason for the market to go up. Indian stock indices had hit record highs in January in anticipation of stimulus measures, but this sentiment was overtaken by fears of China’s growth getting hit by the coronavirus outbreak. The Nifty fell 1.7 per cent in January and has retreated 6.2 per cent from its all-time high of 12,430.50 on January 20.

“Economic recovery will now happen on its own as there is no acceleration or impetus from the budget and hence there is no immediate trigger for the markets to move up,” said Rahul Singh, CIO (equities) at Tata Mutual Fund. “Select value stocks where there is a high dividend yield can benefit.”

Money managers believe that China coronavirus-related developments will be the key guide going forward.

“With no triggers now, markets will be driven by weak global factors, especially what is happening in China,” said Patil of Aditya Birla Sun Life MF.

By the year end, money managers see some improvement in the market — 45 per cent see the Nifty at 13,000 by December 2020. Another 9 per cent see the index at 13,200 by then and about 18 per cent expect the Nifty to rise above 13,500.