No trigger, markets likely to stay depressed

After a volatile movement on Budget day with the key benchmark indices ending lower, the markets are likely to remain depressed ahead.

According to analysts, the market may open lower or flat on Monday as the Budget does not offer much reason to cheer in the short term.

A K Prabhakar, head of research, IDBI Capital said the Budget is "neither positive nor negative" for the domestic market, and the bank stocks are expected to perform better.

He said Friday's stock market reactions were more over the proposal of increasing minimum public shareholding.

"It is only a proposal which Sebi will look into. Also, it is unlikely to be implemented soon as many companies are yet to adhere to the 75% promoter shareholding norms. This may take a far longer time," Prabhakar said.

Both the key benchmark indices ended in red on Friday, with BSE Sensex closing 0.99% lower at 39513.39, while broader NSE Nifty 50 falling 1.14% to 11811.15.

An analyst, on condition of anonymity, said several public sector companies, especially PSU banks, are yet to follow 75% promoter shareholding norms.

"Before asking private companies to lower promoter shareholding, the government must follow the rule itself. Also, lowering promoter shareholding to 65% may only see foreign funds coming for companies with a good track record. For most private listed entities, this may pose a challenge," the analyst said.

The analyst said the 25% corporate tax extension to companies with Rs 400 crore turnover also does not make a difference for the market as it would leave out most big listed companies, and may only include smaller corporates and SMEs.

"Multiple taxes are not good for corporates. If jobs are to be created, corporates must be given some tax benefits to invest more in the country and create more jobs. Else, big corporates have the option to invest anywhere in the world. In short, there is nothing spectacular about this Budget, though it isn't bad," the analyst said.

Vinod Nair, head of research, Geojit Financial Services, said the market has expectations from the Union Budget after the huge mandate to the BJP government.

"The market was expecting that the government would provide support to the economy by spending more, even if that dilutes the fiscal deficit target. But that did not happen, and the market is not likely to take it positively in the short term," he said.

Nair said the 35% of the minimum public shareholding is only a proposal and should not be looked as negatively.

"It is only a proposal, no clear direction to it yet. There might be a timeline to this, and if it is 3-5 years, then it should fine. While the 25% corporate tax for companies up to Rs 400 crore turnover that is likely to benefit small-cap companies is positive, the higher taxation on high networth individuals is a negative," he said.

According to another analyst, who does not wish to be named, the overhang from Friday's Budget announcement is expected to continue this week. Auto, IT and some large-cap stocks, with high promoter holdings, are likely to remain depressed. Many listed entities, including IT companies, are also opting for buyback route and the buyback tax of 20% is a negative for such companies.

LITTLE TO CHEER

• Both the key benchmark indices ended in red on Friday, with Sensex closing 0.99% lower at 39513.39, while broader NSE Nifty 50 falling 1.14% to 11811.15
• The market may open lower or flat on Monday as the Budget does not offer much reason to cheer in the short term