NOT BULLISH ON THE FM Trust deficit hits Street

Sensex Falls 210 Pts On Fisc Worries, Govt's Track Record

 Despite a rather deft balancing act, Dalal Street gave a thumbs down to Pranab Mukherjee's seventh Budget, pulling down the sensex by 210 points to 17,466 as domestic investors, rather than the foreign ones, pressed the sell button. The absence of any immediate trigger for the market was the reason for the sell-off on Friday, brokers and dealers said. 

    However, they agreed that there were a lot of proposals with good intent, and if implemented properly, they will have a positive impact on the market in the long term. "This time market's expectation from the Budget was low, and it did come out the same way," said Nirmal Jain, chairman, IndiaInfoline group. "But, there were some proposals with very strong intent." For example, the proposal on Rajiv Gandhi Equity Savings Scheme, that intends to bring in a large number of retail investors into the market. "It points to the fact that the FM is willing to broaden the investor base and spread the equity cult," Jain, who's IIFL is one of the major players in the retail broking business, said. 
    Given the government's not-so-good track record of sticking to its Budget numbers, the Street is keeping its fingers crossed. "Over the medium term, both debt and equity markets will draw comfort if the government sticks to the borrowing limit and that may trigger a reduction in yields," said Gagan Banga, CEO, Indiabulls Financial Services. 
    On Friday, however, while the sensex closed 1.2% lower, bond yields hardened. A clear sign that bond dealers were not convinced that the government will be able to rein in borrowing and keep yields in check. And the slide in the stock market left investors poorer by Rs 90,000 crore with BSE's market capitalisation now at Rs 62.4 lakh crore. 
    The day's trading was marked by volatility. The sensex rose soon after the start of the Budget speech, then entered the negative territory but regained lost ground to enter the positive zone. However, a bout of late selling, led by index heavyweights RIL and SBI, pulled it back into the red. RIL closed 2.9% down at Rs 775 while SBI fell 2.9% at Rs 2,233. 
    Among the other sensex stocks, ONGC was one of the top losers, closing 5.2% lower at Rs 272. The stock lost after the Budget increased cess on crude oil. Cairn India, a nonsensex stock, lost 6% to Rs 346. As a result, BSE's oil & gas index closed 3.3% lower. 
    Among the other top index losers were Sun Pharma, down 7.1% at Rs 545, Jindal Steel, down 4.2% at Rs 575, and NTPC, down 3.8% at Rs 173. Among the handful of gainers were ITC, up 3.5% at Rs 216, and M&M, up 1.9% at Rs 672. 
    Looking beyond the Budget, the market now wants the government to take the fiscal consolidation roadmap ahead with a possible increase in petro product prices, which will be crucial to providing RBI a headroom for significant rate action, said Nimesh Shah, MD & CEO, ICICI Prudential Mutual Fund. 
    Market players also said that the international events and the liquidity flows will again be in focus. On the domestic front, RBI's annual policy next month, and the quarterly results will be the nearterm triggers for the Street. 
    Although there was not much for the FIIs, net inflow by foreign fund managers into the stock market on Friday was Rs 883 crore, taking the year's total to over Rs 66,000 crore (about $13 billion). This figure includes the FIIs buying large blocks of HDFC and ONGC.