Financial Daily from THE HINDU group of publications
Monday, Jul 05, 2004
Columns - A Ringside View
Holding nerves for Budget day
THE stock market, before the Budget announcement, regained some of its lost composure last week after declining consecutively for three weeks. The widespread rise in the market last week was accompanied by improved volumes.
The possibility of the Sensex topping the 5000-mark before the Budget has not dissipated yet. Politicians willing, the benchmark index may cross the psychological barrier this week.
The politicians, who swear by democracy (and now economic reforms), will have yet another chance from Monday during the Budget session to display how unreformed and undemocratic the system is, which they either rule or oppose. If political hysteria takes over floor of the Houses upstaging economic governance, it will be a matter of subjective political semantics. But if the market gyrates because of that, it is the market's problem.
The market has built up expectations from the Budget, which is evident from the increase in the outstanding position. This has also raised the risk of market violently reacting to the Budget proposals if they are not in tune with the expectation.
The most interesting factor was that of an attitudinal change vis-à-vis the priorities of the new Government. The proclaimed thrust on the rural sector by the Centre was viewed by the market as negative in the first few weeks of the change over. Price indications last week suggested that the perception has undergone a change.
Hopes of continuation of reforms process and reengineering of the agro sector to spur the industrial growth have returned. However, the Budget itself will actually mould the market responses from Thursday onwards.
According to charts, the Sensex is likely to face resistance at 5000-5020 points level, while the first support level is available at around 4,785 points.
Last week, on Tuesday, Wednesday and Thursday, the Sensex created higher tops and lower bottoms. But on Friday, the bearish trend was broken by the index after creating higher top but not the lower bottom. After a long time, market finished with a positive breath - gainers outnumbered losers on all the trading days last week.
The fact that the mid cap stocks got going is an indication enough to say that market readying itself to open up again. But the streak of bearishness and caution ran parallel in the trading pattern both in the cash and derivatives segment.
The short-term trend of the market has turned upward and may continue for some more time depending on the Finance Bill. The medium-term technical trend has also thrown up soft indications that worst could be over.
The bears have begun covering their positions. But oversupply at higher levels has been smothering the upward trend.
If the stock market can ignore political tantrums, and if the Budget proposals do not prove to be dampener for investments in general, then the indices may sing with the monsoon.
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