Budget Fails to Uplift Markets

The Union Budget 2013 proved to be the biggest event for India Inc this week. However, there is very little to cheer from the budget, which is clearly visible in the performance of the indices. In the last week, the Sensex and Nifty have declined by 2.06% and 2.23% respectively.

With the reactions of the markets it can be said that they have taken the budget with a pinch of salt. Yesterday, the markets dropped sharply to end at a three-month low after the Union Budget failed to cheer investor sentiments. Nifty, at the end of the day, closed down by 1.79% at 5693. The markets saw a fall with the highest ever turnover at Rs 4.2 lakh crore. The previous record stood at Rs 4.16 lakh crore.

On the other hand, the Ministry of Statistics and Programme Implementation (MOSPI) has come up with a disappointing set of Q3FY13 GDP numbers, which came in at a meagre 4.5%. The data came in much lower than the market expectations which estimated the growth to be around 5% to 5.5% for the December 2012 quarter. The number is among the worst in the decade and is also witnessing a declining trend.

The GDP for Q1FY13 had come in at 5.5%, while that for Q2FY13 had come in at 5.3%. The CSO had previously estimated the GDP at 5% while the RBI was cautiously optimistic and expected the growth to be at 5.5% for FY2013. Whatever be the case, after looking at the Q3FY13 numbers, it is quite clear that we are struggling for growth and our economy is going through a pretty rough phase.

On the global front, the United States (US) recently came up with a couple of major announcements. The first one was its GDP numbers for the December 2012 quarter, while the other one was about beginning the sequester (compulsory spending cuts) from March 1, 2013. Its GDP which grew by 0.1% in the December 2012 quarter, well below the Wall Street’s expectations of around 1% for the quarter. The next most important declaration was that of sequester. This term which sounds somewhat alien, means a default punishment, i.e. If the joint committee (which consist of the members of both the Republican and Democratic Party) fails to bring out a proper road map to reduce the debt burden and bring down the deficit, then there would be some compulsory spending cuts. These mandatory cuts are known as sequesters.

The money inflows from the FIIs remained strong in the last week. The FIIs pumped in Rs 45,642 for CY13. The DIIs again remained in red selling of equities worth Rs 6,801 for CY13. With the budget gone by, the next trigger for the markets is the RBI monetary policy that is scheduled for March 19, 2013.