Despite hopes and fears, Budget 2016 unlikely to send market crashing, say experts
Domestic investors remained cautious and maintained low expectations from the Budget 2016, even as the Economic Survey painted a rosy outlook for the economy.
While the investor community on Friday exuded more fears than hopes with regard to the Union Budget 2015-16 on the penultimate session of the event, if we go by what analysts say, the Budget announcements are unlikely to bring in any major crash to the market in the near-term.
On Friday, the 30-share index settled the day at 23,154, up 178 points, while the broader 50-share index quoted 6,970, up 48.10 points at close.
The gains made were, however, quite lower than the ones seen on European markets, as domestic investors remained cautious and maintained low expectations from the event, even as the Economic Survey 2016 painted a rosy outlook for the economy.
Amisha Vora of Prabhudas Liladhar believes markets will not move beyond 5 per cent in any direction from the current levels and that range will be more dictated by the global risk uncertainties rather than Budget. "I see little reason why the risk-off in the global markets and also the reverse-flow from emerging markets will change in a hurry. We believe markets will move in the plus/minus range of a 5-per cent post Budget," said Vora to Business Today online.
Dinesh Rohira, Founder & CEO of 5nance.com sees Sensex and Nifty to hit 22,600 and 6,900 levels if the government fails to come up with a bold Budget and follows the same footsteps as last two years.
"Domestic markets will correct unless there are some bold reforms, like the 1997 or 1991 budget, which will change the face of the economy or at least a budget that will promise a policy framework for bolder reforms in the coming future," said Rohira. However, Ambareesh Baliga, independent market analyst does not see any major crack on the indices post budget unless there are specific anti-market measures. He expects Nifty is likely to remain in range between 7,000 and 7,600 over the next two months. It is notable, the benchmark indices, riding on the Reserve Bank of India's surprise rate cut, had hit their all-time highs three days after Jaitley presented Budget 2015. The 30-share index climbed to 30,024, while 50-share index hit 9,119 on March 04, 2015 after the RBI cut its repurchase (repo) rate by 25 basis points to 7.50 per cent. The current repo rate stands at 6.75 per cent. RBI may have exuded confidence in the government's fiscal consolidation path mapped in the Budget 2015, analysts do not expect the same to repeat this year with little room left with government to adjust its kitty on account of additional outgo towards 7th Pay Commission and One Rank One Pension (OROP). Baliga said out-of-policy action post budget is unlikely as maintaining fiscal prudence on the part of government will be difficult in the current scenario. He expects status quo in the first half of the calendar year. Shrey Jain, Founder and MD, SAS online.com also feels RBI rate cuts will happen in the second half of the year, and that too by a modest 50 basis points. "In all likelihood, the government will opt for pump-priming the economy. Enhanced government expenditure could prove inflationary and will reduce the scope for the RBI to cut rates," said Jain. However, Amisha Vora said the actual action on interest rates would not merely depend on fiscal deficit, if US Federal Reserve goes for a rate hike, Rajan will not be left with more choices but to cut rates.