Muted Expectations from the Union Budget….and the FM delivered on cue…..Sensex rally of 500 + Points had to reverse

Immediate Take on the Union Budget

 

Nothing much was expected from this Budget and our FM met these expectations…..I had not expected any Amnesty Scheme or bold vision or dramatic reform announcements….too many pressures and pulls and compulsions being faced by this UPA Government currently

 

Markets were however buoyant from Morning and post budget speech Sensex surged over 500 points at one time reaching 18297 prompting me to alert clients that these gains will reverse….they did by over 400 points in the last hour or so,although Sensex closed up 122 points….more a relief rally really + some short covering

 

Macro Concerns are yet intense…Interest rates…Inflation…Oil Prices….global tensions in MENA…..FM really had his hands tied

…with inflation high he had to put monies into the hands of the People…his Direct taxes sops will lose Rs 11500 crs for the Government….he is recovering these from Indirect Taxes

…..he seems to have misunderstood what we wanted for our Infants and Women !…he has reduced the Excise Duty on Diapers and Sanitary Napkins from 10% to 1% !

 

He also seems to have worked backward to put a lid on the fiscal deficit….gave a % & number to it…4.6% of GDP at 4.12 lakh crs,lower in % terms but slightly higher in absolute terms than this year, and then adjusted other heads !…for example subsidies ,especially fuel look too low at Rs 23000 + crs

….he has targeted 9% GDP Growth rate for 2011-12….looks challenging as in 2010-11 we have seen 8% + every quarter…and Corporate Earnings may be impacted next fiscal year as Interest Rates remain high

….and the Deficit will continue to be funded by strong Government Borrowings of Rs 3.43 lakh crores…with this pressure and high Inflation  expect Interest Rates to firm up some more !…they are already at 10% levels

 

Markets got an unexpected  positive in that FM announced that Foreign Nationals that meet KYC norms will be allowed to invest in Equity Schemes of SEBI registers Mutual Funds….this opens out a whole new class of investors to tap…..KYC norms would mean these Foreign nationals would require PAN numbers 

 

Direct cash Subsidies to Below Poverty Lines Indians for LPG,Kerosene and Fertilisers in a good first step to eliminate malpractices in subsidy distribution….UID is yet a year away to use as an efficient platform for financial inclusion and distribution of resources  

 

First Draft Guidelines for issuing fresh banking licenses will be released by RBI by March 31,2011….host of Companies are planning to apply…IDFC,IFCI,L & T,India Bulls,Bajaj Finance,Birlas,Reliance Capital……expect robustness in such scrips in March

 

Largely a Bottom up Approach in Stock Selection is indicated to be a better strategy

A more elaborate Budget Special is going out to clients shortly…. demystifying the figures and UPA mindset on Policies and Strategies and Thrusts….will blog some interesting extracts

….in the meantime expect the Sensex to meander in March

Cheers ! 

 

4 thoughts on “Muted Expectations from the Union Budget….and the FM delivered on cue…..Sensex rally of 500 + Points had to reverse

  1. Hello Sir ,

    I have been tracking Silver since last year and its doing good and if news is to go buy it has a long way ahead.

    Things sound very good if we are to believe the news articles and I am sold to it.

    Was wondering if you could share your views on the metal.

    thanks

  2. You know the Budget is NOT GOOD when Tobacco companies (ITC, etc) RALLY & Hospital/Healthcare/software stocks crash!!!
    My sincere thinking is Inida is a great country lead by inept/timid politicains.
    We need more bold/out-of-the-box visionary leaders to compete with China/USA/Germany NOT vote-bank driven policy.
    This century belongs to innovators & going by the countries current direction i feel we will soon have our ‘Jasmine revolution’ (hordes of unemployed youth meaning demographic disaster NOT dividend+high inflation+crony capitalism, unbelievable income disparity+Maoist presence is 200 out of 600 districts with whom we negotiate for release of 1 ‘Important’ IAS officer so that they call kill 1000 innocents whose death will never be covered by media.
    Everybody said Mubarak was too strong, there would be no revolution.
    Everybody says India is a democracy,9% growth. We will have no revolution.
    Alas What we learn from History, is that we don’t learn fron History!

  3. Conventional wisdom: You know a commodity/stocks is near its peak when it makes Headlines in newspapers 😉
    In my humble opinion its safer & more prudent to stick with Gold with unprecedented currency printing by central banks/Fed & unresolved sovereign debt crisis , the only certainty is uncertainty & inflation!
    BUY GOLD!

  4. Thanks for sharing your opinion Swaroop, appreciate your view.

    As such I have been tracking silver for more than a year and its doing quite good whereas gold hasnt moved much in last one year, assuming the information in public domain is true (ie stocks of minable silver, why its not recycled, its current industrial usage and demand) I am sold to silver :), however I am quite diversified with gold silver and SIPS and lot of debt, so am kind of protected even if my bets go wrong :p

Leave a Reply

Your email address will not be published. Required fields are marked *