Budget judgeit

Finance Minister Piyush Goyal with MoS finance ministers Shiv Pratap Shukla and P Radhakrishnan arrives at Parliament to present the interim Budget.

It was an eventful week at the markets with the markets opening on a weak note and remaining so for the first three days. Thursday, January 31, which was expiry day saw markets making a massive up move. This was followed by another up day on Friday February 1 when the Budget was announced. BSESENSEX gained 443.89 points or 1.23% to close at 36.469.43 points. NIFTY gained 113.15 points or 1.05% to close at 10,893.65 points. BSE100, BSE200 and BSE500 were up 0.91%, 0.80% and 0.71% respectively. BSEMIDCAP was down 0.28% while BSESMALLCAP lost 0.36%.

The top sectoral gainer was BSEIT up 4.39% followed by BSETECK 4.28% and BSECON DUR 2.20%. The top loser was BSEMETAL down 1.80% followed by BSEOIL&GAS 0.95%. In individual stocks, the top gainer was ZEE Enterprises up 11.63% followed by HCL Tech 7.52% and Axis Bank 7.19%. The top loser was Vedanta down 16.75% followed by Yes Bank 15.48%, Adani Ports 9.50% and India bull Housing 9.15%.

Dow Jones gained 326.69 points or 1.32% to close at 25,063.89 points. The Indian rupee lost 6 paisa or 0.08% to close at R71.24 to the US dollar. January Nifty futures expired on a positive note and closed at 10,830.95 points, a series gain of 51.15 points or 0.47%. This was an extremely choppy series and neither the bulls nor the bears were in control of the same. The markets kept on oscillating in a broad 200 points positive and negative range, with the bulls finally winning a closely fought series.

Fiscal discipline maintained
The Budget was presented on Friday and had enough for the vulnerable sections which were probably affected and were thus unhappy with the government. The small farmer has been provided with an assistance of Rs 6,000, the middle class with effectively a monthly salary of R60,000 and investing the maximum amount of Rs 1.5 lakh under 80 C would pay no income tax. Further, the worker in the unorganised sector has been provided a pension of Rs 3,000 per month post attaining the age of 60 years on payment of Rs 100 per month. There has been some math used in managing the fiscal deficit even after providing Rs 75,000 crore for the farmer scheme. This money would come from a larger dividend from RBI and the expectation of better and buoyant tax collections.

The market liked the budget because it did not go overboard on grants, subsidies and doling out money to win votes. It kept the fiscal discipline even though the elections would tempt to go full hog. While the fiscal deficit could see some slipping, it is still manageable.

The week also saw the primary market issue from Chalet Hotels Limited open and close for subscription. The company raised Rs 950 crore as a fresh issue and an offer for sale of 2.4685 crore shares in a price band of Rs 275-280. The issue was exorbitantly priced and left nothing on the table for the investor. This is confirmed by the poor subscription that the issue received. Except the QIB portion which was subscribed 4.66 times, HNI portion was subscribed 1.10 times and retail a mere 0.03 times.

This from an issue which the merchant bankers were confident would revive the primary market. The biggest shocker was the fact that there were a mere 5,250 applications received where based on the minimum application of 53 shares, there should have been 3.91 lakh applications for the retail portion to be subscribed. Very clearly the response was much below expectations and in no way has the revival of the primary market helped.

Some key issues addressed
The week ahead sees RBI meeting for its bi-monthly review meeting. It is widely believed and expected that rates would be kept unchanged as with the government in election mode, there could be a minor rise in inflation. A possible rate cut is certainly ruled out and the possibility of a hike in these circumstances where inflation is under check is unlikely.

The budget is the kick-off to the elections to be held in April-May 2019. The ruling party has tabled a budget which they believe addresses the issues of the marginal farmer, the middle class, unorganised labourer amongst others. There is only so much and no more that could be done in what is known as an interim budget. Need for more or higher expectations can never be satisfied. This budget has addressed some key and burning issues and probably that is why the opposition is criticising this budget so much. Expect volatility with an upward bias to be the order of the day in the week ahead.

Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd.
Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is for educational and information purposes only.

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