The Budget did what was expected — cut import duties further to tame inflation. As expected agriculture appears to be the thrust area and although rural credit had grown dramatically — the fact that output had not, was quite worrisome. A lot could have been done for agriculture — where over 115 million families derive their livelihood — there were little offered as a creative solution — only more allocation — though some encouragement was given to seeds and to water projects. There were no major changes on various fronts such as — land mass use policy, creation of "special agricultural zones" on wastelands, addressing climate change issues. No indication as to how the policies, which had not worked earlier for the farmland, would now work. Climate change could be affecting agriculture and industry must play its part in minimising the impact to ensure sustainable development. The corporate sector did not get much relief from the Budget — perhaps there was none required — but their involvement in agriculture and environment management would be a key in the long term. That integration with the farmers seems to be the key for long-term development. This Budget could have heralded a `New Deal', but it did not. In many senses this was a routine budget — not grandiose in its vision, nor flexible in its approach. It seemed to be dictated by an immediate political compulsion of taming inflation and maintaining stability of the overall policy direction.
Franklin Templeton Investments
The Budget, as expected, was a non-event. The market reaction to the Budget was in the backdrop of negative global cues. The India story is very much intact. We feel that investors need a strategy, which responds to the prevailing situation in the market. In the current market context, a lower risk and higher return strategy will work best for investors. Long-term mid-cap investing and contra investing as themes address this need and have potential to deliver handsome returns for investors, going ahead. The key message for investors is that the market is bullish and is likely to move up strongly over the next few years. However, there will be intermittent corrections.
Lotus India Mutual Fund
Our confidence regarding equities in the medium term remains intact. The corporate environment remains favourable, both in the short term (the economic situation is supportive for sales) and in the long term (limited rises in labour costs, sound financial structures, cost of borrowing below the return on equity). In addition, relative valuations have deteriorated somewhat, while absolute valuations remain favourable. Finally, the amount of liquidity available for investment remains huge and is likely to continue to be preferentially directed towards equities. This is especially so given the limited outlook for gains on other asset classes such as government bonds which are now distinctly overvalued. The next few sessions are likely to be nervous, but won't call into question our outlook for 2007, which is an upward tendency on equity market.