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Monday July 6, 05:50 PM
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MARKET VIEW - BSE Sensex falls 6 pct after budget
MUMBAI (Reuters) – The BSE Sensex (^BSESN : 16158.28 +94.38
) recorded its biggest fall in six months after Finance Minister Pranab Mukherjee unveiled the federal budget on Monday.
The government said it would raise spending to spur growth, pushing the 2009/10 fiscal deficit to a higher-than-expected 6.8 percent of GDP. Mukherjee estimated 2008/09 economic growth at 6.7 percent.
The benchmark index fell as much as 6.4 percent, its single biggest fall in a day since Jan. 7 when the markets were spooked by the unfolding of the fraud at Satyam (SATYAM.BO : 103.35 +0.7) Computer (now Mahindra Satyam).
Pranab Mukherjee's budget on Monday was the inaugural budget of the new Congress-led coalition government which was voted into power in May.
The benchmark BSE sensitive index had risen 17 percent on May 18 after the election results on expectations the government now had a free hand to push through reforms and set the economy on the growth path again.
Following are comments from market participants on Monday's fall:
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I.V. SUBRAMANIAM, CIO, QUANTUM ADVISORS PVT LTD.:
"I think initial expectations from the budget were high. Some of the speculators must have built up position. Since there was no -- what you call headline announcement -- it has sort of disappointed some of them.
"I actually think it's a decent budget. What he has not done is that he has not been market savvy enough to give a direction on how he will raise the money."
GAJENDRA NAGPAL, CEO, UNICON FINANCIAL, NEW DELHI
"You are talking about 9 percent growth, but how are you going to achieve it? You are talking about huge spending, but how will you mobilise resources? The budget lacked details.
"There was no clear word on which PSUs you are going to sell. I think these were the missing links. Also, we had a run up ahead of the budget and our valuations had gone up compared with other emerging markets. So this sell-off includes all those things."
SAMEER NARAYAN, HEAD-EQUITY, FORTIS INVESTMENT MANAGEMENT:
"People were expecting everything to come in the budget. What has probably not gone too well is...the entire fiscal deficit estimate of 6.8 (percent) and the gross borrowing going up...I think that is what has clearly spooked the investors. That's what is visible in the way the yields have gone up and may be that's having a rub-off effect on the equity market as well."
GAURAV DUA, HEAD RESEARCH, SHAREKHAN LTD.
"The Union Budget has fallen short of high market expectations. The street has reacted negatively to issues such as high projected fiscal deficit of 6.8% (and more importantly there is no roadmap of bring it down), no mention of reforms in
petroleum and insurance sectors, and absence of focus on aggressively pushing ahead the divestment program."
RUSSELL PARERA, CEO, KPMG, INDIA
"The stock markets have voted on the tax budget presented today. However I believe that this fall could be attributed partially to the markets having run up on the back of disproportionate expectations."
NARAYAN S.A., MANAGING DIRECTOR, KOTAK (KOTAKBANK.NS : 763.15 +45.2) SECURITIES
"As far as the markets are concerned, the recent out-performance over other emerging markets and the over-bought status of the markets has led to the correction. The increase in the rate of MAT may also have an impact on profits of select companies.
"We see this fall in markets as a short term phenomenon and focus will now shift to more fundamental factors like earnings growth and the near term phenomenon of monsoon."
RAAMDEO AGRAWAL, JT MD, MOTILAL OSWAL SECURITIES.
"Expectations were irrational. They want power reforms, educational reforms, sugar de-control, all other reforms. The expectation was to have a big banner budget. It did not come through. It was old wine in old bottle.
"I am surprised by the extent of damage to the market. Budget was on expected lines. There is no damage to corporate profits and removal of fringe benefit tax is really good."
DEVEN CHOKSEY, MD, K R CHOKSEY SECURITIES, "
"It was more of a technical correction. Too much optimism was built up in the markets over the budget and today markets witnessed the much needed correction.
"FIIs are surely disappointed on the fiscal deficit front from the budget proposal but the valuations are too tempting and FIIs would pick up this chance to enter the Indian markets.
AMBAREESH BALIGA,VP, KARVY STOCK BROKING
"Investors were expecting moon from the Finance Minister which was not reasonable. It was a mix of profit booking and speculative selling by the investors. Though we were not that disappointed by the budget, some selling from the FIIs were quite prominent. We are looking at a range of 3,800 -4000 points for Nifty (^NSEI : 4796.15 +30.6) over the next few days".
DINESH THAKKAR, CHAIRMAN & MANAGING DIRECTOR, ANGEL BROKING.
"The Budget proved to be a low-on-deliverance affair and this was magnified on account of the huge expectations that the market had built from it.
The Budget "was silent on the timeline for tackling the fiscal deficit...reforms process announcements expected from it which would have aided in handling the fiscal situation.
"Overall, while the Budget did not stand true to all of market expectations, we expect that the government's efforts will continue outside the Budget also... Thus, we expect the stock market to reflect this improvement..and advise investors to stay
long on the India story."
C J GEORGE, MANAGING DIRECTOR, GEOJIT BNP PARIBAS FINANCIAL SERVICES.
"Though the markets could not digest some of the measures, I believe this was a good practical exercise to address some of the key issues.
The abolition of FBT is an important concession for the corporate sector. In the disinvestment side, there is a clear policy statement for increasing public float. We will see the deepening of the stock market, though the participants reacted negatively towards these measures today. We had over expectation. So, the fall in the markets is a natural reaction.
(For more news on Reuters Money click http://in.reuters.com/money)
(For full coverage on Budget 2009 click http://in.reuters.com/news/globalcoverage/budget2009)
