Budget time is here again

Next week on Monday i.e 28^th Feb, 2011 we will have our Finance Minister Mr. Pranabda presenting the budget of India. The sense which we get by reading & hearing is that hope from budget this time is very low. At least people are happy that there will be budget session as winter session of parliament was completely washed out due to opposition demand of JPC (Joint Parliamentary Committee) about the 2G scam. From market point of view Budget could be a very important event this time as investors want clarity on infrastructure (disbursement of orders by NHAI has been halted in last 3 months), reforms, fiscal deficit, current account deficit, tackling inflation & sustaining growth. These things can help bring back confidence as sentiment is at bottom this time.

Sensex is currently trading at 14 times FY12 earning which is at a 10 year average. In 2011 we are second worst underperforming market after Egypt which had a serious crisis. Broader market has corrected a lot and has become very attractive. FIIs YTD have hardly sold off $1.5 billion which is nothing as compared to $29 billion inflow last year. There is a debate going on that US economy is recovering & so FIIs will pull out money from India & other emerging markets. If we compare India with US then we are growing at 8.5% Vs 2% growth in US. India’s fiscal deficit is 5.5% Vs 9.5% of US. Our current account deficit is $40 billion (most of it is gold import around $25 billion – Savings) Vs $700 billion of US. Even on valuations we are at 14 times Vs 15 times of US. So on all counts India fares far better than US. The only difference is confidence & sentiment is low here is India as compared to US. Otherwise we should not forget the big picture i.e it took us 63 years to become $1 trillion economy & in only next 5 years we are going to become $2 trillion economy & in next 10 years $5 trillion.

So we are in that phase of life-cycle who are going to see India transforming which neither our fore fathers had seen nor our future generation will see. Lucky is a small word which we all are to be living & born in this generation. Equity is the only asset class which could give you very good returns in this paradigm shift which India is going to witness.

Happy Investing!!