Few expect stock rally to last for long

Stock market punters and investors might have gained over Rs 15,000 crore following the spurt in stock prices leading to a jump in marke...

Stock market punters and investors might have gained over Rs 15,000 crore following the spurt in stock prices leading to a jump in market capitalisation or total value of all listed shares overnight, but corporate captains and analysts 8212; who are not really excited over the Budget presented by a fragile coalition government 8212; are not sure about the sustainability of the rally. They are also skeptical about any improvement in the corporate bottomlines after the Union Budget.

The 165-point jump in the sensitive index on Saturday came as a surprise to everybody. Brokers and traders expressed confidence that the current rally will easily push Sensex to the 3600 mark, but they are not as confident about taking the rally beyond that point. 8220;With the Sensex being represented by more than 50 per cent by Hindustan Lever Limited, ITC, GLaxo, Novartis, NIIT and Infosys, the 3600 mark looks easily achievable,8221; said K Ramachandran of Birla Marlin Securities.

Said Hongkong Shanghai Banking Corporation Securitiesofficial Sanjeev Sanghvi, 8220;the preferred sectors seem to be software, fast-moving consumer goods FMCGs and pharmaceuticals. The evening out of long-term capital gains tax is a positive move. Mutual funds should get a boost. The downside is the surcharge on corporate tax which was anyway anticipated. The Re 1 increase in diesel prices is also a downside.8221; Once the initial euphoria peters out, index may once again be stuck in the 3,200 range, said another analyst.

What has put a spoke on the wheels of Corporate India is the 10 per cent surcharge on corporate tax. On the face of it, from the way share prices shot up on Saturday, it is clear that apart from software, pharmaceutical and FMCG sectors, there are no major gainers from Yashwant Sinha8217;s budget.

Also the Budget has been a mixed bag for various industry segments like steel, cement and textiles which are trying to adjust with the realities of demand recession and high input costs. The Budget proposals are not expected to make much impact oncorporate giants like Reliance, Tisco, Telco, Bajaj Auto and so on.

Certainly measures like the government package for Unit Trust of India UTI, tax sops on dividend income from mutual funds and reduction in long-term capital gains tax on Indian investors from 20 per cent to 10 per cent came as shot-in-the-arm for markets. But will it help on long term? Unless the industrial growth picks up and profits improve, the market will falter again. 8220;The market cannot be revived through sheer fiscal incentives8230; the underlying economy has to be boosted,8221; said R H Patil, managing director, National Stock Exchange NSE.

While the sops to UTI, mutual funds and investors may lead to a buoyancy in the capital market for some period, it is still premature to say whether it will change the fortunes of the industry.

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It is also unlikely to lead to a jump in foreign investment and mobilisation of resources and, above all, result in the revival of the hitherto dormant capital market.