Budget to decide sentiment in equity market

When the Union Budget 2011-12 is tabled in Parliament tommorrow, it can be a "game changer" for the stock market, which is currently grappling with macro-concerns, including inflation and the crisis situation in the West Asia and North Africa, say experts.

Steaming crude oil prices spiked by political tensions in Libya pulled down the BSE benchmark Sensex by 2.8% or over 510 points to 17,700.91 level last week. Further, the Sensex witnessed a single day sell-off of over 500 points on Thursday---its biggest decline since August 2009.

"There is a very strong possibility that the Union Budget could be a game changer as far as the direction of the stock market is concerned. The market has a very strong inertia (right now)... If there is one event that can change that, it would be the Union Budget," said Motilal Oswal Financial Services CMD Motilal Oswal.

According to market observers, the Economic Survey and the Railway Budget 2011-2012 announced on Friday, emerged as non-events for the Dalal Street, which is now keenly awaiting positive surprises from the Union Budget.

"We see amnesty scheme, agriculture focus and easing of infra funding issues as the key addressable areas, which could enthuse the equity market.

Besides, a complete excise duty roll-back by 2% and higher fiscal deficit target of 5.5%, if announced, would be major negative surprises," said IIFL Head of Research Amar Ambani.

The markets usually rally before the budget in anticipation of big measures but then get disappointed when the government cannot provide all that the market wants in the finance bill.

Experts tell that this time the expectations are low and the market may actually react positively to any rational measures in the finance bill.

They add the stock market that has plummeted by 13.69% in the year so far, can perk up after the budget announcement on indications of lowering of hurdles on funding and, implementation and execution of projects in key sectors.

"Market performance may be better post-budget as the long-term structural story of India remains intact and investors could take positives from any significant investment plans and execution methodology towards that story," MAPE Securities Head of Research Kislay Kanth said.

At the same time, market observers also point out that though the Union Budget will be an important event next week, external developments, especially in the West Asia and North Africa, will also be crucial in steering the stock market.