Prakash Gaba is one of India's most famous market voices, the man whom most financial journalists turn to when they need help with technical analysis of the markets.
Ahead of Arun Jaitley's and the Modi Sarkar's maiden budget, he shared his views on how the budget could impact Sensex and the direction in which markets are headed.
How do you read the current market valuations?
I being a Technical Analyst do not look at valuations as a rule but I am given to understand that fundamentally the market is fairly valued, at this juncture.
That said, it is important to realise that the market is now into a bull phase and this bull phase has started after the market gave a technical breakout after 78 months of consolidation.
This breakout according to me has come to stay and we are now into a midst of a secular bull phase that could last years and it is typical that in the bull phase, the valuations tends to get stretched. So, I would not be surprised if the market first strays into over valuation zone for a while and then stays over valued over a prolonged period.
What is the sentiment among traders ahead of the budget?
The market has seen a good bull move but interestingly the retail traders seem to have missed the bus as first they never believed in the bull move and then when the realization came, it was a bit too late. They thencontinued to wait for the correction and the correction never saw the light of day.
Retail traders are now perhaps ready to invest in the market and are hoping that budget would give them the right opportunity but I seriously doubt that any significant correction would happen… We could see corrections but that corrections would be perhaps more time-wise corrections than the price correction. And looks like many traders will still miss the bus.
What are the sectors you see benefiting the most?
I would prefer to see the infrastructure sector predominately benefiting from the budget.
Commodities like metals and cement would be a natural beneficiary too from the budget.
Auto ancillary is another sector that could look to benefit from the budget due to domestic and export advantage because of rupee's current valuation.
Capital goods will definitely be a plus especially those defence related as there could be increasing indigenisation of the defence sector.
What are the sectors you see being hit?
I really don't see any sectors being hit as the economy will be growing. Some sectors may grow a bit slower, but they will grow.
Five stocks you would pick as worth investing in?
L&T, BHEL, HCC, Tata Steel, M&M and also PSU stocks.
Any stocks people must stay away from ahead of the budget?
Stocks like ITC and HUL would be less preferred as the monsoon is playing havoc.
The budget is expected to raise Rs 700 billion in asset sales. Will this possible tidal wave of privatisation lift all boats? And where do you see the Sensex heading post-budget? Any year-end targets?
Yes, certainly, privatization is a great sentiment booster as it will give the government the much-needed cash it needs for development. Once sentiments improve, money, domestic as well international, will flow into the economy and I will not be surprised if the Sensex climb to even 35000 by next budget… Looks like happy days are here again.
A post graduate in management, Prakash Gaba is one of India's top Technical Analysts. His advice to wannabe investors: Never follow anyone blindly unless you are sure that he or she knows more than you do. Read more about him here.