New Delhi, Feb 28 (IANS) Finance Minister Pranab Mukherjee reached Parliament House here Monday to present the federal budget for the ensuing fiscal and his sixth such exercise in a long political career.
Expectations are high from both households and the corporate sector as this budget comes against the backdrop of high inflation, fluctuating industrial growth, erratic exports and the general perception that the reforms process has retarded.
Ahead of the presentation, the sensitive index (Sensex) of the Bombay Stock Exchange (BSE), though, was ruling at 17,833.38 points, with a gain of 132.47 points, or 0.75 percent.
Dalal Street Hopes for Budget Boost from Pranab Mukherjee
MUMBAI, fEB 28(TOI): Reeling under heavy losses, Dalal Street is desperate for a good budget. Or at least a feel-good one. But expectations are running low. Economists feel that given the fiscal situation, the finance minister hardly has any leeway to go for a please-the-street kind of a budget either by giving substantial tax sops or any major cut in excise duty. Even if he were to do that, the long-term implications could be negative, they point out.
However, market players are hopeful that the income tax exemption limit could be hiked by a few thousand rupees. They are also expecting the limit for tax exemptions on infrastructure bonds to be raised from the current level of Rs 20,000. The latter could help channelize additional funds into a sector which otherwise might find it difficult to raise more funds since several banks are nearing their sectoral caps, dealers pointed out.
Looking back on the market trend on budget-day, of the last 10 budgets presented by four finance ministers, on six occasions the sensex had closed lower. So, the probability of the sensex rising on Monday is low. However, if one looks at the Budget Day sensex performance since Manmohan Singh's first budget on July 24, 1991, on 12 occasions the sensex had ended higher. Going by this, one can expect a positive closing for the index on the last day of February.
The biggest single-session gain for the sensex on Budget Day was in 1992, Singh's second budget, when the index closed 9.4% higher. But market veterans pointed out that was also the time when Harshad Mehta was ruling Dalal Street. The biggest losing session was in 2009, when Mukherjee presented his first budget under the UPA II regime with the sensex closing 5.8% lower.
Since Mukherjee's last budget, investors have become richer by about Rs 4.7 lakh crore with BSE's market capitalization now at Rs 62.9 lakh crore while the sensex has gained 7.7% to its Friday close at 17,701.
Real estate stocks have taken a hammering, with several frontline stocks at or near their mid-2008 lows. On the other hand, consumer durables and banking stocks have gained the most, one of the main reasons being the fruits of the liberalization process, initiated by Singh two decades ago, driving up consumption in the country. On the flip side, as pointed out recently by RBI deputy governor Subir Gokarn, the prices of protein-rich food items have risen much more than basic necessities, fueling food price inflation.
On Monday, the first two hours of trading on the Street is expected to be muted. After 11am, investors will be glued to their TV sets to hear what the FM says and will then start buying and selling accordingly.