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Poll results pull Sensex down 171 pts

Change in political equation dwarfs the sanguine outlook, reports V Mohan.

india Updated: Jul 06, 2011 12:12 IST
Vyas Mohan
Vyas Mohan

A day before the Union Budget, the benchmark index of the Bombay Stock Exchange, the Sensex, dropped by 170.69 points to end at 13,478.83 points as a change in political equation shadowed the sanguine outlook projected by the pre-budget economic survey.

Though the economic survey of the government forecasts active participation from foreign institutional investors (FIIs) in the years ahead, the markets tanked as Congress lost elections in Punjab and Uttarakhand.

However, post-correction, analysts are optimistic on the market. "We are positive on the market ahead of the Budget and today's fall is due to weak Asian markets and other sentimental factors like the Congress losing elections in two states. Valuations have bettered, and we think this is a good opportunity to buy. The only concern was inflation and that has started coming down. Inflation is expected to dip below six per cent by March-April," says Manish Sonthalia, vice-president of equity strategy at Motilal Oswal Securities.

Sonthalia expects companies in sectors like infrastructure, capital goods and banking to benefit from the Union Budget.

However, another section of market experts is of the opinion that a call on the markets could be taken only after the Budget. "Globally, markets are showing some sort of weakness and Indian markets are expected not to de-link from the trend. Under an inflationary scenario and with the interest rates going up, a relatively lower price-to-earnings multiple of, say, even 16, looks quite high," says Mahesh Bhagwat, head of equities at Mape Admisi Securities.

However, Dalal Street is excited about tomorrow. "I think the budget will be good and the markets would rally tomorrow. But, rather than taking a call on the index, one should go with specific stocks. I am bullish on JSW Steel, Infosys and SAIL," says Madhukar Sheth, a BSE member-broker.

First Published: Feb 28, 2007 02:17 IST