Budget - A non event ! but its an opportunity for the FM

A non event expected really. The budget has normally been the biggest event in the year for the markets. However it has been losing its significance in the face of restrictions faced by the FM politically and financial conditions of the Governments so far. Only 3 out of the last 10 budgets have seen positives for the Markets . Can the FM improve this number this time. Well ! we think, banking on the budget would not be wise. We think there is nothing spectacular which the FM can do to overcome the negatives of high valuations, increasing inflation and slower growth numbers on high base which will be seen. However what we do agree is that company after company that we met with seem to be having huge confidence on business visibility. There was one which said.. that ?Analysts were too optimistic expecting 100% growth.. we will ?only? grow by ?35%? for the next 3 years.?

It could be sweet as well as bit sour but its a big opportunity.. Will he take it ? The budget for FY08 will be presented as always in the last week of Feb (unless there is a new Government). This will be the second last budget ahead of elections so really in a sense it is a big opportunity for the FM. The negative is that the assembly election results which were out today did not have the Congress winning any major state. They were cleaned out which means that the theme of 'common man' or some populism would creep in but guess thats too late for now.

The Budget will focus on rationalisation of taxes and tariffs with an eye on keeping inflationary down. Maintaining growth through continued investment plan into infrastructure should be expected. Widening of the tax base would be another theme.

All in all we guess that there could be some negatives.. The negatives this budget could be no reduction in Corporate taxes. A levy of capital gains tax on Long term gains and increase in Short Term Capital Gains tax by 5%. May be some negative on the FIIs in the form of revamp of Mauritus treaty which could have negative implications. However all of these negatives we believe are less likely though pressure from the Leftists certainly is high for the same.