The Budget offers multiple choice of short-term trades that could be either rewarding or disastrous. It is better to avoid long-term commitments until everyone has a chance to absorb the details of the document.
Instead, one can look for potential short-term plays across sectors sensitive to policy changes. Three areas are worth special focus. Two are specific sectors, namely automobiles and real estate. There is also the broader infrastructure space. There are many stock futures available in these areas, allowing leveraged bets in either direction.
There's not much point attempting a technical view at the moment though of course, the trend is bearish. Budget-related movements are based on information, which isn't publicly available right now. The current trends could reverse, or strengthen.
The Nifty is up seven per cent since last February and down over three per cent in the past month. The CNX Realty index is down about one per cent in the past 12 months, and it's seen a sharp 10 per cent fall in the past month. This is despite the biggest player, DLF, having hit a 52-week high, gaining eight per cent. Parsvnath (+19.5 per cent) is the other big gainer in February 2013.
Four real estate stocks are available in the futures segment " DLF, HDIL
and Indiabulls Real Estate
(IBRE). If there are benefits to the sector, they should all gain in price.
Incidentally, rather than direct sops to real estate, there could be tax breaks for housing loans. In that case, housing finance stocks like HDFC
, LIC Housing
and others, could be the big movers.
The auto sector divides into two-wheelers, four-wheelers, commercial vehicles and ancillaries.
The CNX Auto index has beaten the Nifty over the year (nine per cent) and lost less in the past month (minus three per cent). I'd watch Apollo Tyres
and Bharat Forge
in the ancillaries. Maruti, M&M
and Tata Motors
could all move if there are sops for cars, while Hero and Bajaj Auto
are two-wheelers plays. Leyland is a pure commercial vehicles play.
Infrastructure is the most likely to receive some sops. This is a wide-ranging area. The CNX Infra index includes 25 stocks. The Infra index is down 12 per cent in the past year and down 11 per cent in the past month.
Exclude telecom " that sector's dynamics are more affected by other events. That leaves a large list, including IDFC
, Bhel, L&T
, JP Associates
, Reliance Infra, Tata Power
, Reliance Power
, PowerGrid, PTC
and Adani Group, among others. The over-weighting of power is worth noting. The power sector is in desperate shape and therefore, the most likely to receive sops on that account.