The past week has been a hectic week for the Indian markets. Two of the events - The credit policy and the General budget turned out to be non events, and the third event - A bold railway budget was held to ransom by "Mamata didi'. The UPA government seemed to be succumbing to Didi's dadagiri, creating an embarrassing situation of sacking of the railway minister immediately after presentation of the rail budget. The political situation has taken a turn for the worse and it would be futile to expect the govt. to restart the reform agenda. This would be seen as a major negative by the investor community.
The markets, as expected, gave a lukewarm response to the budget and the decline post budget is likely to continue for some time. However, the excessive liquidity in the market will act as a deterrent for a sharp decline. From now on, international liquidity and last quarter results of India Inc. would decide the short term course for our markets. The markets are expected to trade in the range of 5000-5600 on the Nifty for the next 2-3 months. However, the markets having made a bear market bottom in December 2011 at 4531 on the Nifty, the long term trend remains up. It is a buy on dip market, and investors are advised to enter the markets around 5000 levels on the Nifty.
The Union budget for 2012-13 would be monitored closely by the analysts as far as the fiscal deficit is concerned. It will be interesting to see how the Govt. moves towards reducing a fairly high subsidy burden. The budget proposals are also inflationary in nature in the short term. This would delay the rate cut hopes from RBI. The markets would thus be sceptical in the short term. However, the lack of any negative surprises in the budget bodes well for the markets in the long run.
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