Market rebounds: Will indices be volatile till the budget?

Markets did not witness much spark on the first day of the week as both NSE Nifty and BSE Sensex marked short recoveries. The Nifty ended at 5520.75, up 61.80 points or 1.13% and the Sensex closed at 18438.31, up 226.79 points or 1.25%. About 1390 shares advanced, 1469 shares declined, and 468 shares remain unchanged.
Ajay Argal, Head Equity Offshore, Birla Sun Life Asset Management Company, feels that there is still much nervousness in the market and considering the kind of growth and economy India has, it will be a long-term journey as far as market recovery is concerned.

Argal gave a very neutral opinion on the subject of budgetary impact markets may witness in the next week. He said, “There are hardly any expectations from the budget and purely people are looking for direction in terms of whether the government is doing some concrete measures to get things back on track”
Why budget still remains a non-event?
Like most analysts, he believes that if any positive events happen, it will be good for the markets; otherwise the benchmarks may not react negatively because there are not many expectations from the budget on the positive side.
Reacting on the overall earning picture, Argal said, “The earning downgrade has started happening, may be there is some more to go. We still feel that earning growth could be between 15-20% even for FY12.” In his opinion, as long as the trend is intact and the GDP growth comes around 8%, the markets are looking good from a long term perspective. Moreover, he added that the outlook for IT and infrastructure stocks is definitely positive.
From a point of view of the technical analyst, Mitesh Thacker, the indices have recovered from the previous session’s loss and since Nifty has closed above 5450-5460, it’s good for the markets.
“At least for the next few days despite the fact that we have a lot of events in terms of F&O expiry, impending budget, the start of the parliament session today, very clearly my belief is that given the fact that we have held on 5400 and rebounded from there strongly, we might probably head towards and retest 5550 or even 5600.”
Talking about the fertilizer space, Thacker said that it is a sector where the expectations are high but the budget will not be solely responsible for the movements related to this sector. Looking at the long term perspective, it will prove as an important sector since it gives employment to a large section of the population. “Government needs to have policies which will favor the investment in the sector in a very rational way,” added Thacker.
Being aware of the expectations kept from the budget, Prashastha Seth, Senior VP, IIFL Private Wealth, pointed out that Nifty won’t break the bottom 5200 until budget happens. However, he quickly mentioned that markets may remain range bound and volatile till the budget. “What happens beyond budget is something that only time will tell. I think you need to wait for budget and what the government announces in that to take a call on whether we will not breach 5200 level in March as well,” added Seth.
According to him, we should adopt a wait-and-watch policy till the actual budget and its details are revealed.