Stock markets, barometers of the economy, are likely to remain range-bound with a slight positive tilt in the run up to the Union Budget to be presented on Thursday. After falling 17 per cent in three months, the markets bounced back and gained 4.8 per cent last week on expectations of pro-reform and market friendly measures. For the week ended July 2, 2004, the 30-share BSE Sensex gained 114.19 points at 4,870.58. While the broader 50-share S&P CNX Nifty ended 49 points higher at 1,537.50. The Sensex has risen 226.58 points or 4.8 per cent from a low of 4,644 on June 23, 2004. SA Narayan, MD, Kotak Securities, said, ‘‘The market is expected to remain volatile and with the trend mildly positive on the back of pre-budget expectations. Even during the last week, the trend was mildly positive and same trend will continue.’’ Market participants are not sure whether the budget will be full of goodies. ‘‘There are mixed expectations. The combination of Manmohan Singh and P Chidambaram will is not expected to do any wrong for the economy and take enough care of the fisc. In line with the ongoing statements, schemes for agriculture and rural development are expected. It will be keenly watched how money for agriculture and rural programmes will be raised,’’ added Narayan. Markets are expected to remain range bound through the uncertainty, even amid the volatility. S.V Prasad, CEO, Birla Sun Life Asset Management Company (AMC) said, ‘‘The markets have currently stabilised because of the clarity in the US Fed rates. But ahead of the Budget, speculation and expectations will make markets choppy. Domestic markets expect exemption on long term capital gains to continue and mutual funds in particular, would like equity dedicated MFs free of dividend tax, in the larger interest of institutionalising the markets.’’ Markets are also sitting tight on expectations of positive changes post-Budget, specially since the Sensex had fallen 17 per cent since May — more than it lost in pre-budget jitters since the last 10 years. Sashi Krishnan, CEO, Cholamandalam AMC said, ‘‘Unlike the past, when pre-budget rallies began two to three months ahead of the presentation, this year we haven’t seen a part of it. The pre-Budget rally plays an important role in building up expectations, but this time around nothing has happened in the run-up. Since there is no build up of expectations, no sharp movement is expected post-Budget either. All market movement after the Budget will entirely depend on its proposals.’’ Among the major expectations from the Budget is optimism over the cut in corporate tax to 32.5 pc from 35 pc, which will boost the corporate sector as a whole. The market also expects the government to continue the tax-free status for dividend from equity mutual funds.
