Budget Expectations by Motilal Oswal, Prabhudas Lilladher Group

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BUDGET EXPECTATIONS

Mr Motilal Oswal, CMD, Motilal Oswal Financial Services

There is a very strong possibility that the Union Budget could be a game changer as far as the direction of the stock markets is concerned. The market has a very strong inertia on the downside right now. If there is one event that can change that, it would be the Union Budget.

Expectations:

Expectations are quite low. There is only one expectation that I have. Balance the budget in such a way that the given fiscal deficit target of 4.8% of GDP is met. This would require increasing revenues and curtailing expenses as 3G spectrum revenues are not there this year and which was there last year. Increasing revenues would require complete winding down of stimulus and having a road map for GST. Reducing expenses would require rationalization of subsidies on food, fertilizer and oil 

Where will be the Sensex and Nifty by the end of this fiscal?

In all probability, the developed markets would disappoint on growth parameters in the second half of the current calendar year ,when the effects of QE2 are no longer there . That coupled with China slowing, would put a downward pressure on commodities. India is a price taker of commodities rather than a price setter. Earnings upgrades, if at all, would start once raw material pressure ease . Foreign flows would start looking at emerging markets because of better growth and markets should see higher levels.

I would believe markets should see levels of 21000 and above by March’2012

Budget 2011 expectations [Markets]:

Ms Amisha Vora, Managing Director, Prabhudas Lilladher Group: 

“From the market perspective, investor sentiments got derailed due to slower reforms process, poor governance and sticky inflation. Although RBI has tried to tackle inflation through its various monetary tightening measures, we believe it’s time for the government to address the supply side constraints (mainly the reason for such high inflation) through certain fiscal measures to stem inflation. Excise duty which was lowered to 8% from 14% during the pre Lehman period is currently at 10%. Given the strong auto sales increase in excise duty cannot be ruled out”.