Market may recover on interim budget hopes

Firm global markets and media reports that the forthcoming interim budget may offer tax sops and sector-specific stimulus package may lift the market after yesterday's (5 February 2009)'s slide.

As per reports the government is examining all options including tax cuts aimed at giving a boost to the slowing economy and relief to the industry to prevent job cuts. Given the severity of the current global financial and economic crisis, the government may announce some measures to boost the economy even as the established political practice is not to announce tax changes in interim budget so as to avoid burdening the new government. The Indian industry has sought tax benefits like cut in the corporate tax rate from 30% to 20%, sops for the housing sector and relief from payment of fringe benefit tax for exporters.

The government has already announced two fiscal stimulus packages to boost demand. The government will present an interim budget on 16 February 2009 before the parliament elections which are due by mid-May 2009.

Asia stocks rose for a fourth day on Friday, 6 February 2009, with investors awaiting a vote on a massive US stimulus package. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore, Taiwan and China were up by between 0.55% to 2.9%. The US Senate is debating a $920 billion plan but it could shrink before being passed.

US stocks rallied on Thursday, 5 February 2009, on investor hopes that the government's plan to shore up the financial system will include a change in accounting rules that would stem bank write-downs and spur lending. The Obama administration is due to announce its bank rescue plan next week.

A solid January sales report from Wal-Mart, coupled with better-than-expected reports from a few other retailers added to the positive tone. The Dow Jones industrial average rose 106.41 points, or 1.34%, to 8,063.07. The Standard & Poor's 500 Index gained 13.62 points, or 1.64%, to 845.85. The Nasdaq Composite Index climbed 31.19 points, or 2.06%, to 1,546.24.

Oil prices slipped 25 cents to $40.92 a barrel, after climbing about 70 cents overnight on hopes for US stimulus measures to take shape sooner rather than later. As it has for the last three weeks, the $40 level has been a floor for prices.

The BSE Sensex lost 110.97 points, or 1.21%, to 9,090.88 on Thursday, 5 February 2009. Lingering worries about the economic slowdown, weak global markets and sustained selling by foreign funds pulled the market lower