What a rollercoaster ride it was today for the markets but then, isn’t that the case every year? To put things in perspective, the Nifty rallied from around 10,865 at the start of the budget speech to 10,983 by the time it ended. Then, it collapsed 170 points to 10,813 before recovering 80 points to close at 10,893. In the case of the Bank Nifty, the numbers were even more startling, hitting a high of 27,533 before plunging to a low of 26,930 and finally closing at 27,085.

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These are my primary thoughts and I might revise this blog tomorrow based on the inputs I get from my conversations with market participants.

The overarching theme of the budget is very clear. The government wants to address the two big constituents of the electorate – the farmers and the lower middle class.

Hence, it doled out the farmer income package and the no income tax for those earning under Rs 5 lakh. You saw those announcements play out today in the way the consumption stocks rallied, the prominent ones being Hero Moto and Jubilant Foodworks.

However, do ask yourself this question: are the moves enough to warrant a re-rating on these stocks or was today just about market positioning in most of these stocks? (Both Maruti and Hero were at 52-week lows and Jubilant was off its highs while not disappointing on earnings).

My sense is that while the auto stocks may not re-rate, they may have put a near term bottom in place. But the problem is they don’t count for much in the Index. Ultimately, it’s about banks, where things are looking eerie once again, especially with ICICI Bank and Yes Bank.

IT though remains a steady sector for the market and of course, the giant that has woken up — Reliance Industries. But my sense is that the market cannot break out unless financials support and that is my big risk. Give the way money markets have behaved and now more clamour for a rate cut, I have a gut feeling that financials will correct from here.

Aside of budget, there is a regulatory issue opening up for the markets. I am referring to the single stock accidents, which are now happening with fair bit of consistency. We have had DHFL, YES Bank and Zee Entertainment until now among large stocks falling off the cliff. Now you can add a Vedanta as well.

Market analyst Saurabh Mukherjee made an interesting point. Most of the regulatory issues crop up when there is a liquidity crisis, the examples being Enron and Satyam. Right now, the market is facing a liquidity squeeze.

The final outcome then and my final thought is as goes. The budget told us is one thing which everyone should be crystal clear about: Right now, the market lacks triggers to break past 11,000, just like it lacks triggers to break 10,500 on the downside.

However just keep an eye on broader market. Like I wrote in my last piece, if that does not improve, the odds of break down will just get a lot more better.

First Published:Feb 1, 2019 5:55 PM IST