Market Watch | Hits and misses | Hindustan Times
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Market Watch | Hits and misses

Neither is this a bad Budget nor a great one, perhaps a neutral one, to be forgotten in a week's time, analyses Udyan Mukherjee.

india Updated: Mar 01, 2008 14:57 IST

Purely from a capital market perspective, this is a budget with hits and misses. It is not a bad budget, neither a great one, perhaps one that will be labeled "neutral" and forgotten in a week's time. It does not have enough in it to break the market, but perhaps does not pack enough of a punch to lead to a break-out on the upside either. It is not a complete non-event like last year's budget, but broadly inconsequential in a material sense.

The good news first. There is more money in the hands of the salaried class and rural folk. It is always difficult to gauge the exact elasticity this extra disposable cash will have on demand, but at least the finance minister has added the cash to people's kitties, thus bringing the proverbial horse to the water. The excise cuts are welcome as they will be passed on and therefore reduce price points in the economy. Perhaps it will stoke demand for certain categories like consumer goods and automobiles. Again, difficult to quantify and perhaps premature therefore to start upping earnings estimates for companies in these sectors, but surely a step in the right direction.

At the time of writing this piece, I am unclear about how the Rs 60,000 crore debt waiver will be treated in the books of the government, though intuitively as a taxpayer one cannot be happy with such moves and the kind of precedents they set. It may be good for bank stocks, though, as their books get cleaned out on a government dole. I am baffled at the short-term capital gains tax hike and the tinkering with the treatment of the securities transaction tax. Absolutely avoidable and bad for market sentiment, particularly at a time when sentiment is fragile anyway. But these disappointments do not linger; the market will digest them soon enough. In summary, this budget will be forgotten a week from now and more important considerations will take its place. I doubt if earnings expectations for too many stocks need to be tweaked after this budget. Just as an aside, it may be prudent to factor in elections in 2008 itself, going by the signals, and that becomes another event for the market to price in perhaps a few months ahead of schedule. Else, life carries on, it is back to basics again.

(The writer is Executive Editor, CNBC-TV18)

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