Interim budget fails to enthuse market

Sensex sheds 329 points; markets expected some sector-specific relief ‘The budget has remained focussed on spending on rural infrastructure and it has not cut down the Plan expenditure.’ The interim budget presented by External Affairs Minister Pranab Mukherjee, who is in charge of Finance, on Monday failed to enthuse stock markets and the Bombay Stock Exchange benchmark Sensex lost 329.29 points. The broader NSE 50-share Nifty lost 99.85 points. The vote-on-account was a non-event for the markets with no major initiatives or measures being announced. While a vote-on-account does not normally contain any major initiatives, the market had expected some sector-specific relief. “This expectation was in view of the weak economic environment,” said Dipen Shah, Vice-President, Kotak Securities. The BSE Sensex opened at 9637.04 touched a low of 9279.10 and finally closed at 9305.46 against its previous close of 9634.74. The NSE Nifty lost 99.85 points to close at 2848.50. While there were no significant announcements made in the interim budget, there has been a fair amount of work already done by the government to stimulate demand such as the fiscal stimulus to sectors such as agriculture and increased spending on social services. “We now need to wait for 6-8 months to see the effect of these initiatives on the Indian economy,” Falguni Nayar, Managing Director, Kotak Investment Banking. “In addition, from the point of view of addressing the economic slowdown, focus on the infrastructure sector is key. We need to significantly step up public expenditure in infrastructure, develop innovative structures for infrastructure financing and encourage global infrastructure funds to invest in India.” “The budget has remained focussed on spending on rural infrastructure and it has not cut down the Plan expenditure, though it has come at the cost of increase in fiscal deficit. Given the general slowdown across the globe, most countries have been stimulating the economy using the fiscal route. India has not been different from others on this perspective,” said A. Balasubramaniam, Chief Investment Officer of Birla Sun Life Mutual Fund. “The vote-on-account did little except announce some specific allocations to the social sector flagship programmes of the UPA Government. While higher spend on schemes such as the Bharat Nirman may help in infrastructure creation, we believe these may help the government in the up-coming general election. Fiscal measures are expected to be announced in the full budget following the general elections, depending on the economic scenario,” said Mr. Shah. The vote-on-account has revised the financial year 2009 fiscal deficit to 6 per cent and revenue deficit to 4.4 per cent of GDP, which are significantly beyond the budget estimates. This rise is mainly because of the fiscal measures taken during the fiscal, loan waiver package and also the higher subsidies. Rupee sheds 15 paise In tune with the fall in stock markets, the rupee lost 15 paise against the dollar on Monday and closed at 48.82/83 against 48.68 last Friday. Besides weak equity markets, lack of any direction from New York as markets are closed there for observing President Day Holiday, weighed on the domestic currency. At the inter-bank foreign exchange market, the rupee opened sharply lower at 48.78/79 and moved down further to settle at 48.82/83. Forex dealers said fears of capital outflows due to uncertain equity markets put some pressure on the rupee.

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