Expecting A Lack Lustre Budget

For the first time in last so many years, the MEDIA has actually not as big a hype surrounding the union budget as was the trend in previous years.

The only thing in contention is that whether or not the government will withdraw the stimulus package all at once, or will phase out the exit. There is hardly any probability of any new perks for industries with which it would benefit.

Based on the railway budget, it seemed that the government is in a mood to go for more socialist causes, since despite a shrinking surplus for the Railways, Mamata di did not hiked any of the passenger fare or the freights. Hence, if Dada also goes for socialist causes the deficit situation would worsen and can cause a selling in the broader markets and banking in specific

The economic survey document released today highlights the three key issues:

• Growth coming back on track and will reach around 9% by FY12
• A "gradual rollback" of stimulus measures after assessing the impact on each sector
• Concern of high food price inflation and this spreading to general economic inflation

Thus, I believe this budget to be a non-event in general, however too much socialist expenditure to cheer the AAM ADMI or a higher than expected roll back of the excise duty and higher than 5.5% announcement of FY11 deficit could lead to a sell off in the markets.

You could use the LINK to download our research team's Consensus budget expectation report.

Happy investing.

Sprinting Economy Does Not Need Crutches

FACT:

In last 19 years, since 1991 the Indian Stock Markets have ended negative (down) on 15 ocassions in the month after the budget.

Indian Economic growth as the MEDIA says is back on track with the December IIP surging over a record 16%.

Despite the this record breaking IIP performance the stock markets did not performed the way it used to perform in the past. The key reason I believe is that the street by seeing the sprinting economy is factoring in that the government will withdraw the fiscal stimulus crutches it had given the country when it was on its knees.

Moreover, the government is facing an acute problem of rising fiscal deficit and thus it has to take stern actions to reduce the same. Hence, instead of providing any further perks that could help the corporates it will take back the ones which are already being provided.

Thus, I strongly believe that one should remain extremely cautious and should not go long now expecting a pre budget rally, since its just a MEDIA and BROKER's jargon to get retail investors into the market and distribute the stocks they are still holding. The rally may be there, just to entice the investors and should lead to a sell off after the actuals are out.

Happy Investing..!!