Budget is over and so are the eventful days. Market did like budget and so was up around 4.5% in last week. The key positives which came as a positive surprise is 4.6% fiscal deficit target for FY12 along with government borrowing figure of Rs 3.43 lakh crore which was assumpted to be above Rs 4 lakh crore. No change in excise duty & disinvestment of Rs 40,000 crore for FY12 cheered the markets. UID & disbursement of cash subsidy directly to the end user would be a game changer for India in coming years. Execution of budget will be closely monitored by markets in coming months.
Budget optimism has ended & from now onwards two things will determine the trend of the market in 2011, which is Crude oil & Monsoon. Brent crude is currently trading at $117 which is not tolerable as we are more sensitive to oil prices. Upside seems capped till oil comes down. But in next 3-6 months it seems unlikely even if Libya crisis diminish. Financial speculation is playing very large part in oil prices along with uncertainty in middle-east. Saudi Arabia’s market is down 24% on the perception that something wrong is going to happen. So there will be risk premium for the next 3-6 months on oil prices even if nothing happens. As India is an agricultural country, monsoon plays a big role. So from 2nd half of the year focus would shift on progress of monsoon.
On the positive note we are still in a secular bull market which started in 2003 & will continue for many many years to come. Recently Citigroup came out with a report that India would become the largest economy of the world by 2050. Even Mr. Mukesh D. Ambani in his recent conference said that India would become $5 trillion economy by 2022-25.
In my next blog I will touch upon how Bihar is changing.
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