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Monday, February 3, 2014

2014 Budget Expectations...or Non-expectations!

The reaction of Markets to the RBI policy was mild to say the least with the longer end of the yield curve trending upwards by 10 bps.The future policy is dependent on the inflationary trend and the measures are date bound.

The adoption of CPI as new benchmark of inflation needs to be watched closely.

Come February and every market participant,investor,trader begin to focus on the Budget even though the past couple of years it has been almost a 'non-event'.In an election year with the UPA coalition rife with internecine troubles of sundry graft charges,a resurgent opposition and a 'dark horse' party,the thinking will be populist but how much?

The CAD seems reasonably under control,will one action by the Government throw logic out of the window?

No reforms expected.Some infrastructure projects to be cleared.Amidst the uncertainty I feel it is prudent to focus on the fundamentals of the economy as well as individual companies and it calls for a bottoms-up approach.

Another thing to note is the recent 25 bps hike by the RBI in the repo rate to 8% will leave a lot of debt laden India firms breathless.

Coupled with the tapering by the Fed and a stronger than expected recovery in the US means that export oriented bussineses should be the focus.The USDINR remains in the 62-65 band and has shown remarkable lack of volatility in the last Quarter.


The Expectations from various lobbies and sectors are :-

* Affordable Housing sector seeks Infrastructure status
*Mutual Funds ask for lower tax on Debt Funds
*India Inc seeks growth focussed themes
*hospitality and Infra firms want low cost funds

Yet a report released by Citibank and Goldman Sachs says Emerging Market countries have a lower real interest rate compared to Inflation which translates to a possibility of interest rates inching higher.All those who are rushing to buy income Funds or Bonds should still wait for TWO more quarters before deciding.

Global news,Chinese PMI,Europe job figs have all become critical in the rapidly integrated economy that reacts to all kinds of events.I would still look at those companies that make quality products,have a stable market share,not over-leveraged.My Picks for february remain:-

a.Bharti Airtel
b.ICICI Bank
c.Reliance Industries
d.Sun Pharma
e.Larsen&Toubro
f.Tech Mahindra
g.Zee Entertainment
h.SBI

Happy Investing in these times of glorious uncertainty.Its in your moment of decision that your destiny is decided...!!