Why are these sectors rallying? Prime Minister, Mr Narendra Modi has stated that focus of his Government would remain on rapid development of highways, railways, ports and power. It is expected that, NDA Government would revive the National Highway Development Programme. Moreover, the Government is likely to introduce time bound plan for implementation of infra projects. Minister of State (Independent) for Environment, Forest and Climate Change, has already promised faster clearances to infra projects, without compromising on environmental issues. The NDA Government also wants to develop at least 100 smart cities across the country. You see, Mr. Modi has already abolished the system of Empowered Groups of Ministers (EGoMs) and Groups of Ministers (GoMs), and this in our view is a positive step to speed up the process of decision making. It is also now expected that the Government will take efforts to improve bureaucracy and cut down red tapism, and thus has already released a 10-point agenda for good governance. But there are some challenges... Government has a tough task of curtailing deficits and boosting growth. The fiscal deficit for the current financial year has already reached 45% of the full year target. Although this is mainly due to carried forward subsidies of Rs 35, 000 crore, it may restrict the ability of the Government to allocate higher amounts for developmental projects. Scanty rainfall so far, also poses a risk of high food inflation. Geo- political tensions in Iraq and Syria may continue to affect the oil prices until the issue is resolved completely. So how is the equity market likely to move post budget? Over last 10 years, total 12 budgets have been presented including 2 interim budgets. The analysis of past 10 years suggests that when markets enter a budget with a lot of expectations, they tend to fall and vice versa. It was only once, i.e. in 2006, that the Indian equity market generated positive returns in immediately preceding and succeeding month after the budget. On the contrary, 6 occasions markets rallied post budget.
Posted on: Thu, 03 Jul 2014 02:37:54 +0000
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