Nifty closes below 7600 ahead of Budget; ITC, ONGC support

18:23

Moneycontrol Bureau The market shed 2.5 percent in two consecutive sessions ahead of much awaited event – the Union Budget 2014-15 to be presented in parliament by Finance Minister Arun Jaitley on Thursday.

The 30-share BSE Sensex fell 137.30 points to 25444.81 while the 50-share NSE Nifty closed below the 7600-mark, down 38.20 points to 7585. The broader markets saw major selling pressure again compared to benchmarks with the BSE Midcap and Smallcap indices falling 1.44 percent and 1.82 percent, respectively.

The downtrend may continue for some more time, the Nifty could break 7500 level on Thursday as the government may not be able to meet all (high) expectations in this Budget, say experts. They advise investors to wait till Budget before taking any major positions in the market. However, post Budget they expect major recovery in the market, adding the Nifty may surpass even 8000-mark.

" Some amount of correction is likely to happen in near term but if one is a long term investor then there is no need to panic. It is just a correction and no bull market goes up without any correction or without any volatility. So, this is part for the course and the long term story is intact. We advise investors to hold on to the stocks," says RR Venkataraman, Managing Director, India Infoline.

Sanju Verma CEO, Violet Arc Global Managers advises not to trade tomorrow as volatility will be very high in the market. But she expects the Nifty to cross 8000 in a post-budget move .

Meanwhile, Finance Minister Arun Jaitley presented the Economy Survey in Parliament today ahead of Union Budget. He estimates FY15 GDP growth at 5.4-5.9 percent, which is likely to be on lower side of projections, he says. According to him, subsidy reforms are essential to fiscal consolidation that remains imperative for the economy. He adds that raising tax-GDP ratio will be key to fiscal consolidation.

He sees RBI taking accommodative stance as inflation eases. According to him, WPI inflation is likely to moderate by 2014-end. However, downside risk to economy is due to geopolitical tensions and from poor monsoon and investment climate.

Union Budget will be key to watch out for tomorrow as people have huge expectations from the new government. Some of the expectations are tax exemption, hike in deduction allowed under 80C etc. Experts believe his priority is to keep increasing tax collections, keep fiscal deficit at a manageable level that will stave off a ratings downgrade, attract investments and boost the overall growth cycle.

Stocks in action

Technology, auto, infrastructure and private banks drove the market lower while the buying in FMCG, oil & gas and metals capped the downside.

Shares of TCS, Tata Motors, M&M, Bajaj Auto, Maruti Suzuki, Tata Power and Coal India were prominent losers in the Sensex, falling 2-3 percent followed by L&T, HDFC, ICICI Bank with more than 0.6 percent.

However, cigarette major ITC bucked the trend, rising 1.7 percent. Credit Suisse has maintained outperform rating on the stock with a target of Rs 400. The brokerage is positive that excise duty hike on cigarettes is unlikely in Budget even though investors are nervous.

The fall in Brent crude lifted oil & gas stocks today. Oil marketing companies like BPCL, HPCL and IOC rallied 2-3 percent. Even upstream companies like ONGC and Reliance Industries gained 1.8 percent and 0.5 percent, respectively. Brent crude slipped below USD 109 a barrel as Libya restarted oil field and Iraq concerns eased.

Top lender State Bank of India was up 0.2 percent. Bank of America Merrill Lynch says the stock could be worth Rs 4,500-5,000 by FY18, implying 65-85 percent upside potential. Aluminium major Hindalco Industries rose 1.2 percent on better-than-expected results by global metal giant Alcoa.

Decliners beat advancers by a ratio of 2086 to 894 on the BSE.

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