Budget unlikely to trigger bull run, feel marketmen

Sangita Shah

The most awaited Union Budget next month may not have the magic effect of pushing up the markets as it did in the previous years, market players believe. In fact, if the path is not tread carefully, it might give out wrong signals to the market sending it to dumps.

"There is no magic wand left for the finance minister to wave which can trigger an across-the-board bull run. There have been various measures announced throughout the year and over a period of time, leaving no scope for springing surprises," Devesh Kumar, head of equities, I-Sec said.

Stock markets have been in the dumps since the announcement of the last budget in February, after the initial euphoria of two days.

The government announced various measures during the period till now including relaxation of FII investment limits, introduction of futures trading in individual stocks, rolling settlement and relaxation in buy-back norms.

"This budget is likely to be more of streamlining in nature and have structural adjustments than any new real economy drivers," the chief investment of a foreign fund said.

Indian stock markets have a history of reacting to the Union budget on days after its announcement when it was presented in the evenings. The stock markets across the country had a special post-Budget session to display the reaction to the Budget.

However, since the last three years, the timings for the presentation of budget in Parliament being changed to the morning, the markets have seen immediate impacts during trading hours.

The finance minister is expected to pursue five objectives in the forthcoming budget.

The objectives are likely to come in the form of measures to increase the share of direct taxes in government revenues, steps to boost new public investments and focus on revenue deficit instead of fiscal deficit for an interim period, the control on revenue deficit may be exercised through non-plan expenditure side especially streamlining the subsidies, measures to drive recovery in bank NPAs by relaxing demerger and amalgamation norms and rationalisation in customs duties.

Though all these measures will have a macro level impact, they might be not enough to pull out the market from dumps, market observers say. "There might be impact on select stocks owing to industry-specific measures," an analyst said.

Though last year, the stocks crashed after a couple of days of the budget announcement which led to the 'yet to be concluded' joint parliamentary committee probe.

The secondary market will be driven more by the good monsoons and a pick-up in rural demand.

Technology companies, too, are reporting flat-to-a-light increase in their third-quarter results, which is much better than the worst-case scenario conjured post-September 11.

And, as the war tensions with Pakistan disperse, there looks like no stopping the sector as most US companies are preferring to outsource their technology requirement. A flurry of new offerings are expected to take off purely on these grounds, analysts say.

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