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Budget & Market Correction

Economy on the runway and ready to takeoff will soar to heights after couple of sorties. For some years the trend is to bet big on Nifty through F&O contracts in the run-up to the budget and on the other hand there are fewer derivative positions on the benchmark index this year. Because the participants are not sure as to how the indices will respond after the budget presentation .There is aggression seen on bets on shares through futures indicating clearly that they expect that specific stocks will move rather than the index. Just a day prior to the budget presentation the open interest in Nifty was 9.70 crores approximately and its the lowest before the budget day since 2010.Moreover the shares of the front-line midcap  companies like India cements ,JP Power, GMR Infra , Jindal steel and Unitec have fallen by 20% in a week’s trading sessions as Midacps and Smallcaps came under the selling pressure as both the indices tumbled BSE Midcap by  1.44%  and BSE Smallcap by 1.82% .


As this budget has failed to deliver the market has corrected further because in the past six months or so the mid and small caps have grown four times in anticipation of the radical reforms promising a boost in earnings and the investors have a gut feeling that the earning recovery may not be that fast and hence the correction at the speed of a Bullet train .But given a two years time mid as well as small cap stocks are definitely expected to do very well. 

This correction was also inevitable because both the mid-cap and the small-cap had soared 35% and 51% respectively, both these indices had outperformed the BSE Sensex which only performed 20% during the same period. It was just a sheep walk of buying these indices,but nothing to worry the mid-caps are bound to outperform the large-caps in the coming months because the mid-caps have higher beta so this clearly indicated that stock movements will be higher than the swings of the market .So lot is expected from the Finmin all we can cheer is -- Bhag Jaitley Bhag.