Investors Bet On Housing Finance, Capital Goods and Engineering Shares Ahead of Budget

Investment

oi-Sunil

By Sunil Fernandes

Updated: Tuesday, February 24, 2015, 9:30 [IST]

Union Budget 2015-16 is the most eagerly awaited Union Budget in recent times and many are hoping that it would be a path breaking one.

This is because its the first full fledged budget of the government and there are so much expectations from a government that is largely considered as investor friendly.

As we head into a new trading week ahead of Saturday's Union Budget (Feb 28) the volatility index has hit a nine month high.

Markets are seeing investors placing a lot of buying options and the open interest is also sharply higher.

Bets On Select Sector Stocks

Investors are laying their bets on housing finance companies, capital goods and engineering shares ahead of the Union Budget.

The reasons for the same are simply this. As far as housing finance companies are concerned we are seeing a smart rally as it is expected that the tax breaks for home loans might increase.

The bets are that the exemption paid on interest on home loans and the principal amount would be hiked. At the moment there is a tax break for interest on home loans paid under section 24 of the Income tax Act to the tune of Rs 2 lakhs.

On the other hand there are hopes that the tax break on the principal amount paid would also be hiked along with the Sec 80C limits.

This is why we are seeing a rally in home loan companies. For example, on Friday stocks like GIC Housing Finance and Canfin Homes saw good gains despite the benchmark indices ending the day lower.

There could be an ongoing rally in these stocks at least until the Union Budget. If there are no sops for the industry be rest assured that stocks from the sector would fall.

Capital goods stocks also have been seeing a rising trend. On Friday, BHEL saw large scale buying on the hopes that the Union Budget would help revive the investment cycle.

Investors have laid aggressive bets on stocks like L&T, which is a great proxy for the capital goods and the infra sector.

Much hopes are pinned on the Union Budget 2015-16. The risks are simply too high at the moment. Bullish bets are clearly significantly higher than the bearish ones.

What this means is that there is very little scope for disappointment from the Union Budget.

Should it seriously ending up disappointing, a five per cent decline in the benchmark indices cannot be ruled out.

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