V K Vijayakumar, investment strategist, Geojit BNP Paribas Financial Services believes that the coming budget is likely to be a highly reformist budget like Manmohan Singh's 1991 budget. The tough measures taken by the government recently pertaining to the rail fare and freight revision indicate that the government will bite the bullet and implement the much needed reforms.
''Since fiscal consolidation and boosting investment are crucial for macro stabilization and growth revival, it would be realistic to expect reforms in these areas. The FM is likely to lay out a clear road map for fiscal consolidation with credible measures to achieve the target. Similarly, many more sectors, with the exception of multi-brand retail, are likely to be opened for FDI,'' he said.
''The government is likely to reject the macro figures presented in the vote on account, particularly those relating to fiscal deficit, subsidy, revenue target and borrowing. The fiscal deficit is likely to be projected at a realistic 4.5 % of GDP rather than the 4. 1% projected by P Chidambaram.''
''The highly reformist budget is likely to boost capital market sentiments facilitating further capital inflows into the country. However, we expect a sharp correction in the market post budget. The correction will be triggered by profit taking by FIIs and HNIs who are presently sitting on huge profit. The absence of any major event after the budget will be another factor that will trigger the selling,'' Vijayakumar said.
''The unfavourable environment created by the Iraq crisis and the poor monsoon will contribute to the negative sentiments. But, we feel, the post budget correction, if it is sharp and swift, can be a good opportunity to enter the market. In the eventuality of very poor monsoon and dimming growth prospects, investors should increase the weightage of pharma and IT stocks to their portfolio. The medium to long term prospects for the Indian economy and stock market appear to be very promising in spite of the short term hurdles. This is a 'Buy on Dips' market,'' he added.
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