With the Railway and Interim Budget out of the way, all eyes are on the upcoming general elections and Reserve Bank’s upcoming Monetary Policy meet. The street is expecting a 50-100 bps rate cut along with several measures to ease liquidity in the system.
A week back the picture in the markets was not as gloomy, but a lacklustre Interim Budget and rising recessionary fears seem to have dampened sentiment. The markets had held on to last week gains ahead of the interim Budget and did not fall in tandem with the global cues. However, Asian markets were trading lower last week on the back of weak global cues. The Sensex was ruling around 9450 levels ahead of the Rail Budget, but closed at 9,634 on D-day.
Stocks like Kalindee Rail Nirman, Kernex Micro, Titagarh Wagons, and Stone India which were buzzing ahead of the Rail Budget have also cooled off post its announcement and have resumed their southward journey. According to analysts, the correction is not over yet in some of the stocks.
The Interim Budget too failed to meet market expectations and this triggered a fall. The Sensex has now gained momentum on the downside and has slipped below the 9000 mark for the first time in February. It has shed nearly 600 points in the last two trading sessions. The Midcap and Smallcap Index too has lost 6% & 5% respectively. Similarly, the Nifty closed below the important technical level of 2775 today. Realty led the bear cartel with close to a 10% loss in two days. This was followed by the Bankex, Metals, and Auto indices which lost a bit of ground post the Interim Budget.
Traders started unwinding their long positions in sector specific stocks which were likely to benefit from the Interim Budget. Fresh build up of shorts was seen in realty and banking in today’s trade. The Nifty Open Interest Put Call Ratio (PCR) has also dropped from 1.34 to below 1.2. Moreover, markets are falling along with high turnover which suggests that fresh shorts are being built up in the market.
Real estate stocks saw creation of long positions ahead of the Interim Budget on expectation of further stimulus in terms of tax breaks or revision of slabs for interest rates. No announcement from the Interim Budget led to crack in stock prices. Orbit Corporation, Peninsula Land, Ansal Properties, and HDIL fell 5.7-8.8% in today’s trade. Unitech tumbled 6.14% and DLF was down 5.19%.
There was also expectation of rate cuts from RBI prior to the Interim Budget. Bonds had also rallied ahead of the Budget. No such announcements coupled with fall in bond prices led to collapse in the banking stocks. ICICI Bank lost 5.69% while HDFC Bank and SBI fell 3.77% and 3.14% respectively in today’s trade.
Tax breaks for the auto sector and an increase in fertiliser subsidy were some of the market expectations which the government failed to deliver on. Auto and fertiliser stocks also took pounding in the two-day bear rally.
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