Nifty Set to Cross 9,000 Levels: Sanjeev Bhasin

The week ahead should see Nifty cross 9000 and the Sensex 30,000 as market participants reacted favorably to the two big events of the year- the Railway and Union Budget.

Foreign institutional investors will be ready to allocate more flows to India as most of their agenda on wish list would have been met. Lowering of corporate tax, removal of MAT (minimum alternate tax) and postponement of GAAR (general anti avoidance rule) by another two years would surely have met if not bettered their expectations.

The big surprise was the Railway budget which was the most ambitious seen in the last 25 years. The budget also clearly outlined a 5-year trajectory for growth and modernisation with a mammoth Rs 8.5 lakh crore modernisation target, which if even implemented by 50 per cent should see GDP spurt by 200/300 basis points. Unlocking and monetization of the land bank (the Railways is arguably the largest government land bank owner body in the country), improving freight corridor rationalisation and improving network with expansion of lines all would be the basic thrust over the next 5 years.

Raising debt partly from the centre & the rest by sovereign bonds from Insurance and global pension funds was also strongly recommended as ways to raise the money.

The Union Budget extended the 3 per cent fiscal deficit target by 1 year and put emphasis on growth to drive the economy towards the 7.5-8.5 per cent GDP target by 2017. Maintaining subsidies for the poor and yet by providing 'sops' for the common middle class, the Budget tried to meet the aspirations of all classes.

Overall deduction benefits to individual tax payers hiked to Rs 4.44 lakh, exemption on health insurance premium hiked from Rs 15000 to Rs 25000, service tax hiked from 12 to 14 per cent and abolition of wealth tax which was replaced by 2 per cent surcharge on income above Rs 1 crore and issuance of gold bonds with collateral yields being offered were the other highlights.

Technically, the market saw a very weak February expiry on Thursday which dragged the Nifty below 8600. However the rally over the next two days driven by the Rail budget saw the Nifty recover smartly and close above 8900. Technically, the Nifty now has seen the second highest ever closing and is within ear shot distance of 8,956 the highest closing ever. We feel the Nifty should cross 9000 next week with Sensex attempting 30,000 and crossing the same.

Globally the rally in equities continues to be the theme for early 2015 as most indices are hitting new highs with leadership coming from the Japanese 'Nikkei" index hitting new 15-year highs.

With inflation on a weak trajectory and bond yields on the 10-year government paper @ 7.7 per cent, rate cut from the central bank would be the next trigger as the bond yields continue to trade below the 'repo rate' of 8%. The rupee @ 61.8 also improved sentiments as foreign flows chased stocks aggressively.

The week ahead should see new highs as positive sentiment and event risk being over March series has seen extensive buying in 'out of money options' with 9,300 and 9,400 Nifty options seeing heightened activity.