Buy Stocks at Lower Levels; A Pre-Budget Market Rally Likely

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December was not a particularly good month for equities as there was some selling by foreign funds on account of problems in Russia and some profit booking.

In fact, on the last day of the expiry for the F&O series for December FIIs net sold in the cash markets to the tune of Rs 2800 crores. Through the month of December they have been consistently selling while domestic institutions have been buying into stocks.

Buy Stocks at Lower Levels;  A Pre-Budget Market Rally Likely
The markets are likely to rally ahead of the Union Budget as there are huge expectations from the Budget. Buying into stocks is likely and FIIs are likely to return early next year.  PSU Banking stocks are likely to see a rally ahead of the Union Budget. Analysts have now been strongly recommending buying into these stocks.

There is already enough intent from the government to push reforms. Taking the ordinance route for FDI in insurance is a classic example of that intent.

Though the government does not have the requisite numbers in the Rajya Sabha there is a belief that they could still push the reform agenda.

The next two months are likely to be crucial for the government especially since it delivers its first full Union Budget and especially since it has more than sufficient time to prepare. The Union Budget would be closely watched for the government's intent.

It's almost certain that there would be a pre-0budget rally and one can buy into stocks with a two month perspective.

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