Business Today

'Market this week will be driven by Budget'

The Budget is less than three weeks away and entire focus hereon would be driven by Budget expectations. The government is serious on reducing the fiscal deficit.

Arun Kejriwal        Last Updated: February 12, 2013  | 13:58 IST

Arun Kejriwal
The major event this week would be the MCX-SX exchange, which will kick off trade in the cash and derivatives segment of the equities market.

At the formal inauguration of the exchange in Mumbai on Saturday, finance minister P. Chidambaram hinted that there could be reduction in the securities transaction tax (SST) in the forthcoming Budget to encourage higher deliveries and consequently capital formation.

On the flip side, while this may be done, to balance the total collection, STT on intra-day may be increased and tax on commodities on similar lines introduced.

FULL COVERAGE:Budget 2013-14

The market fell on every single day of trading last week and was down for seven consecutive sessions.

A dead cat bounce is imminent but not much movement as markets have turned distinctively weak. The damage has been much more in the smallcap and midcap indices, which have fallen double compared to benchmark indices.

The Central Statistical Organisation (CSO) has predicted the GDP for the financial year 2012-13 to be at 5 per cent, which would be the lowest for the decade. The finance minister believes that this figure is an understatement and GDP would be 5.5 per cent. But the reality is that there is a slowdown and it is hurting all segments and sectors.

The government completed divestment of 78.32 crore shares of National Thermal Power Corporation (NTPC) through the offer-for-sale route. The issue received bids for 1.72 times the offer size, which had a floor price of Rs 145. The cut-off price fixed for the issue was Rs 145.55 or higher.

Foreign institutional investors (FIIs) were big buyers of the issue, which mopped up Rs 11,400 crore for the government. With this issue, total receipt from divestment in the current fiscal is Rs 20,000 crore out of the budgeted target of Rs 30,000 crore.

The initial public offering of Sai Silks (Kalamandir) Ltd is lined up this week. The issue price band is Rs 70-Rs 75 and would garner Rs 89 crore. The company is into retailing saris and ethnic wear and has 16 stores in south India with domination in Hyderabad and Bengaluru.

The company has also offered a voluntary safety net to original retail shareholders, who have been allotted up to 1,000 shares and have an option to surrender them in a voluntary buyback through the safety net to promoters if at any point of time the market price falls below the issue price.

This buyback offer is for a period of up to six months and is intended to revive retail investor confidence in the primary market. FIIs were big buyers last week with net purchase of Rs 15,000 crore, which included a large portion from NTPC. Domestic institutions were net sellers of just about Rs 2,000 crore.

Markets have become nervous with almost the entire gains made since the beginning of the year being now wiped out.

The Budget is less than three weeks away and entire focus hereon would be driven by Budget expectations. The government is serious on reducing the fiscal deficit. One hopes this seriousness continues and does not remain only a budgetary exercise.

With FIIs more than bullish and almost $7 billion inflow in less than six weeks so far, it appears they know more than domestic investors. One hopes that their optimism continues.

Key levels for the Sensex would be 19,250 and 19,700 and 5,800 and 5,995 on the Nifty.

(The writer is an investment analyst)

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