Markets: The cat is out of the bag... - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Markets: The cat is out of the bag...

Mar 1, 2006

The much-awaited event of the year got over yesterday, as the FM 'performed his rituals' and announced a rather bland Union Budget for 2006-07. Although, there were no major reforms introduced on the tax front, which were largely kept unchanged, there was only some tweaking done resulting in no major surprises. This was unlike last year wherein the implications (of issues like FBT) were understood much later. During the day, like every year the indices showed immense volatility but finally ended in the positive. We had recently conducted a poll on our website asking people if they were waiting for the budget to make their investment decisions and the results were quite skewed. Around 62% voted that they were waiting for the budget and 32% indicated not doing so.

Sensex as onů
  12th Feb 28th Feb Change 1st March 15th March Change
2000 5,924 5,741 -3.1% 5,642 5,250 -7.0%
2001 4,406 4,247 -3.6% 4,272 3,820 -10.6%
2002 3,498 3,562 1.8% 3,679 3,618 -1.7%
2003 3,248 3,284 1.1% 3,277 3,108 -5.2%
2004 5,937 5,668 -4.5% 5,742 5,521 -3.9%
2005 6,679 6,714 0.5% 6,651 6,752 1.5%
2006 10,173 10,370 1.9% - - -

As can be seen from the above table, the past trend indicates that post the budget, in five out of the six years under review, the indices have corrected and in some cases, the correction was quite sharp. It must be noted here that history has a habit of repeating itself and hence considering the recent run up of the indices, in our view, 2006 might be no different and thus not be spared.

Also, what seems apparent is the fact that investors seem to have already factored in the little positives of the budget. Investors were looking for more concrete measures that would boosts investments in the country, which did come through in the budget announcements. For once the markets seemed to have been factoring in more of long-term fundamentals than just short-term stopgap measures. Although, growth in some sectors like infrastructure and engineering is visible due to the projects initiated by the Central government, other sectors like cement and steel shall also benefit indirectly.

The post-budget equity strategy
While the short-term traders may not be happy about the 25% increase in STT (securities transaction tax), for a long-term investor i.e., one with a three to five year view, nothing has changed. Equities still remain a high-risk asset class and rewarding in the long-term. Provided there is a decent stock selection process and more importantly, there are promising long-term stories available at reasonable valuations even in this market. Buy those stocks and hold for the long-term and you do not have to worry about yearly budget announcements.


Equitymaster requests your view! Post a comment on "Markets: The cat is out of the bag...". Click here!

  

More Views on News

This Number Will Give You an Edge Over Other Traders in the Market (Fast Profits Daily)

Sep 30, 2020

In this video, I'll share with you, a crucial number that I track everyday which gives me trading edge.

Is Mirae Asset Ultra Short Duration Fund a Right Solution for Your Short Term Needs? (Outside View)

Sep 30, 2020

PFN explains about the Mirae Asset Ultra Short Duration Fund.

India's Drone Revolution is a 4x Profit Opportunity (Profit Hunter)

Sep 30, 2020

My research on India's leading defence companies brought me to one major player in drone manufacturing.

The Gold and Silver Bull Market is Not Over (Fast Profits Daily)

Sep 29, 2020

The last few days have been nerve-racking for bullion traders. Stay calm. The bull market still has a long way to go.

Earned Short Term Capital Gains on Shares? Here's What You Need to Know While Filing ITR (Outside View)

Sep 29, 2020

PersonalFN explains CBDT's clarification regarding scrip wise disclosure in ITR in case of short term capital gain.

More Views on News

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Sep 30, 2020 (Close)

MARKET STATS