Sensex seen at 14k by Budget

ET SNAP POLL STRONG OPENING

THE euphoria is palpable. A stunning mandate, absence of any Left interference, and the likely entry of young faces in the new government could not only liven up Dalal Street punters and local institutions, but also trigger buying by India-dedicated foreign funds that stayed away from the recent rally.
    But it may not be a one-way street for all. There are disturbing rumours that many traders and some big operators have been caught on the wrong foot following UPA's convincing win. These are people, who, last week, went short on the market by writing call options, buying puts, and building naked futures positions. While some of these players are staring at massive losses, they are clearly in a minority.
    According to the average of an ET snap poll of 15 leading brokers and fund managers, the benchmark Sensex is expected to rise between 700 and 800 points on Monday in early trade.
    All the respondents expect the mood to be euphoric, and nine of the respondents were of the view that the Sensex could rise to 14,000 by the time of the Union Budget. Two of the respondents expect the Sensex to trade between 12,000 and 13,000 by Budget, while the remaining three declined to give any estimates. Fresh fund flows seen on cards
IN TERMS of best-performing sectors, an overwhelming majority of the respondents have placed their bets on banking and infrastructure stocks, expecting them to gain from government spending. The consensus view is that sectors like FMCG, pharma and IT could underperform in the near term.
    "There are still lot of short positions in the market. That, and the renewed wave of buying, could push the market up by 700-800 points at opening itself," says A Balasubramanian, chief investment officer, Birla Sun Life Mutual Fund.
    Vikas Khemani, executive vice-president and co-head institutional equities, Edelweiss Capital, expects the Sensex to open with a gap of 8-10% over Friday's close. This view is also shared by Nirmal Jain, CMD of India Infoline.
    "The market will be in an uptrend for the next one week, with most of the gains coming in the first two days of the week," says SA Narayan, managing director, Kotak Securities. He declined to comment on any specific projections for the index, other than saying that only the Budget would decide the medium-term trend for the market. Ved Prakash Chaturvedi, MD, Tata Mutual Fund, was among the handful of participants with a cautious outlook.
    "The market will be euphoric for the next few days. But the fact is that nothing has really changed over the last 48 hours, be it global financial markets or back home, the earnings (growth) momentum of companies," he says. Mr Chaturvedi expects a clear trend only after the Union Budget.
    Motilal Oswal, chairman, Motilal Oswal Securities, too, is "cautiously optimistic" on the market."The euphoria over stable government will continue for a few weeks. Thereafter, the focus will once again shift to corporate earnings and global developments," he says. FMCG and pharma stocks are likely to underperform near term, says most respondents. IT stocks are expected to suffer because of an appreciation in the rupee, the result of foreign institutional inflows.
    "Investors will cut exposure to defensive stocks and move into other growth stories," says Mr Balasubramanian, who is bullish on infrastructure stocks.
    "Infrastructure, power and construction, apart from real estate, will see strong investment flows. Banking and the oil & gas sector will also see lot of action," says Nishid Shah, president and chief investment officer, IDFC AMC.
    Positive sentiment and fresh foreign fund inflows should help the market sustain its upward momentum till Budget, felt most respondents. "The market (Sensex) could climb to around 14,000 by Budget, as there will be a renewed surge of foreign money," says Sandeep Jain, director and head of private client group, Ambit Capital.
    "It could be anywhere between 14,000 and 15,000 by Budget," says Mr Oswal.

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