Time to ride budget stocks

As we approach the year end it is time to again start accumulating stocks which can be positively impacted by provisions of the Railway or Union Budget. Both the budgets are a little over two months away and generally stocks of companies which do business with Railways or are connected with irrigation, education and defence supplies tend to do well. This year also we expect a similar trend to play out.

For the last couple of trading sessions we have witnessed sharp up moves in some of these stocks. If we analyse the data for the last four years then, with the exception of 2008 when the bull market ended in January resulting in a sharp erosion of wealth across the board, we observe that generally these companies have generated fabulous returns in the two months immediately preceding the two important policy announcements.

Two months returns till the budget announcements

Company	Feb-06	Feb-07	Feb-08	Jul-09
Texmaco	58%	69%	6%	71%
BEML	30%	33%	-34%	80%
Jain Irrigation	26%	29%	22%	46%
Aptech	-4%	47%	-38%	33%

This year we expect Railway Budget to have a lot of big bang announcements. Also the social spending is likely to increase significantly in the areas of agriculture, rural development, irrigation and education. Hence stocks like Texmaco, Kalindee Rail, Kernex Microsystems, Titagarh Wagons, BEML, Jain Irrigation, IVRCL, Navneet Publications, Aptech, NIIT, Bluebird etc can be bought on declines. As long as the market sentiment does not change significantly, you are likely to make a lot of money in the abovementioned ideas.