Pre-budget rally good for booking profits

Without FII buying, the market cannot rise higher. FIIs have been net sellers in this month. They were net sellers last month as well. I expect a Sensex EPS between Rs 675 and Rs 725 in FY 2007. It will go up to Rs 775 - Rs 800 in FY 2008, slowing down earnings growth.

There has been relatively lackluster FII response to the three IPOs, which had opened for subscription on Monday, an indication that the FII appetite is waning.

The market may see a correction after the four-year solid bull run. The correction will be slow but painful.

In the near term, the market may firm up ahead of the budget due to market expectation of tax cuts in the budget. Any rise in the market in the run up to the budget should be used to book profit.

Small-cap and mid-cap stocks look attractive as mutual funds have raised a good amount of money in new fund offers dedicated for small-cap and mid-cap stocks.

The structural and secular long term India growth story remains intact.

- Ajit Sanghvi, director, MSS Securities