Budget 2014: Stock market subdued; investors desperately waiting for next govt

Indian shares were largely subdued on Monday, shrugging off finance minister P Chidambaram’s interim budget in Parliament, as concerns of subsidy burdens and weak economic growth continued to weigh down on the markets.

The benchmark 30-share Sensex index rose as much as 0.56 percent or 114.94 points to an intraday high of 20,481.76 points, but retraced to 20,408.31 points, up just 0.20 percent after Chidambaram presented his last speech as the finance minister of the ruling government, ahead of general elections due in April - May.

Ahead of Monday’s interim budget, the Sensex had shed over 800 points in calendar year 2014 and edged down 9.74 points last week - its third straight weekly decline.

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[caption id=“attachment_76600” align=“alignleft” width=“380”]  Analysts are of the view that it is tough to make a call on whether the Indian economy was out of the woods. Reuters[/caption]

Economists were, however, buoyed that India’s fiscal deficit would be contained at 4.6 percent of GDP - marginally below what the finance minister has promised in previous months.

Select auto and consumer durable stocks - where Chidambaram announced some tax reliefs - rose but the broader market indices remained largely sluggish.

“Chidambaram has created this grand welfare administration so that whichever new government comes in will have to grapple on how to balance the books, amid huge subsidies,” said Ajay Bodke, head of investment strategy and advisory at Prabhudas Lilladher.

“The incoming army’s (government) advance has been slowed,” Bodke said.

“Though the fiscal deficit appears to have been contained, this has been done by curtailing expenses and not growing revenues. The market has understood this,” Sonam Udasi, head of research with IDBI Capital Markets.

Udasi said it would be “too tough” to make a call on whether the Indian economy was out of the woods. India grew by 5.0 percent, its slowest pace of growth for a decade, hit by rising inflation, slowing exports and investments.

Udasi said that demand for consumer goods and autos in rural India, remained sluggish and has yet to look up.

Dinesh Thakkar, chairman of Angel Broking said “The upcoming general elections would likely take centre-stage” for equity markets and their outcome would be crucial for determining market direction.

Dealers and foreign investors are hopeful that the market-friendly right-wing Bharatiya Janata Party, led by Narendra Modi, to come back to power in the upcoming elections.

Tata Power rose 4.40 percent to Rs 77.10 at the Bombay Stock Exchange, after Chidambaram announced that the country’s power sector will add 50,000 megawatts through the construction of power plants, including four more ultra-mega power projects (UMPPs) for the fiscal year 2014-15.

Auto and farm equipment maker Mahindra and Mahindra rose 1.34 percent to 914.7 rupees.