The Telegraph
Monday , December 31 , 2012
Since 1st March, 1999
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Market mood seen upbeat till budget

Mumbai, Dec. 30: Stocks are likely to maintain their momentum in 2013 till the budget but may then see a reversal as politics will triumph over policies with the approach of the Lok Sabha elections in 2014, analysts said.

In 2012, the Sensex surprised many by surging nearly 26 per cent amid an economic slowdown and an unrelenting Reserve Bank holding on to the policy rate. The stock rally, which followed P. Chidambaram’s taking over as the finance minister, gathered pace after the Centre announced bold reform measures.

This has resulted in a 27 per cent rise in investor wealth — measured in terms of cumulative market value of all listed stocks — at around Rs 68 lakh crore. Foreign institutional investors (FIIs) made their second largest investment in the domestic market during the year by bringing in over $23 billion.

Though the background seems conducive for the equities to repeat such a feat in 2013, analysts choose to differ.

“At the start of 2012, nobody even thought that equities would give a huge return. But, the year turned out to be excellent. Today nobody is bearish, but the optimism seems to be unfounded,” said Arun Kejriwal, director of investment advisory firm KRIS. He said the markets were most likely to rally before the budget.

However, there is a concern that the budget — the last one to be presented by UPA-II before the general elections in 2014 — will be a populist one.

“The optimism may disappear once the budget is announced. We will have great two or four months in the year, but thereafter as the government comes up with more populist measures, stock values could be affected,” he said.

Ambareesh Baliga, an independent analyst said the year would begin on a good note with an uptick seen in January because of a possible rate cut by the RBI and a likely resolution of the US fiscal cliff, but the bullishness is likely to remain till the budget.

Baliga maintains that the markets are likely to be impacted by political apprehensions in the second half of 2013.

He expects the Nifty of the National Stock Exchange to hit the 6700-6800 levels in 2013, but much will depend on how the political scenario pans out.

However, Alex Mathews, head of research at Geojit BNP Paribas Financial Services, said 2013 would be a good year because of a number of factors ranging from continued inflows from foreign investors to a solution to the fiscal cliff and the apex bank cutting rates by 50-75 basis points in the first quarter of the year.