Plans are only good intentions unless they immediately degenerate into hard work.
Finance Minister Pranab Mukherjee will deliver his first full budget after 25 years. Quite a few measures have already been revealed. Not all of those will find a place in the budget though. Crucial road maps such as the ones on Disinvestment, GST, STT and FBT could come through. It’s a no-brainer that allocations towards UPA’s pet social schemes will be bolstered. There will also be a renewed thrust on infrastructure.
A return to fiscal prudence will most likely be postponed till the global economy revives. A statement of intent towards a few critical reforms should cheer the markets. Take a call only after going through the fine print. After all, this remains a one-day event. Keep in mind that the global scene doesn’t look promising. Doubts continue to emerge on the pace and timing of the global recovery.
We expect a nervous start. Don’t bet too much on the budget. Other variables like earnings, liquidity, monsoon and global conditions are likely to drive the sentiment going forward. In case the budget remains high on rhetoric, better have Plan B ready.
FIIs were net buyers in the cash segment on Friday at Rs2.11bn while the local institutions too poured in Rs2.98bn. In the F&O segment, the foreign funds were net buyers at Rs9.1bn.
Asian stocks are mostly down this morning amid renewed concerns that the nascent global economic recovery could run out of steam. The MSCI Asia Pacific Index lost 0.1% to 102.74 as of 9:50 a.m. in Tokyo. The regional benchmark has slipped 2.4% since climbing to an eight-month high on June 12. The index has rallied 45% since falling to a more than five-year low on March 9. Japan's Nikkei 225 Stock Average and the Hang Seng index in Hong Kong are down 1-1.5%.
United States' Vice President Joe Biden says that the Obama administration misread how bad the economy was, when the stimulus package was being put together at the beginning of the year. Unemployment, at 9.5%, is far higher that the 8% top promised at the time the stimulus was passed. But Biden said in an interview it was too early to say whether additional stimulus money was needed.
The experts are divided on whether the green shoots of global recovery, which have led to a worldwide rally in the past three months, are for real. One school of thought says the so-called recovery might turn out to be a chimera. Others predict that any global recovery, even if it does materialise, may not sustain for long before the same starts to fizzle out. The optimist cap is of the view that historically, deep depressions/recessions have been followed by strong rebounds.
What we would suggest is that amid all the gloom and doom, India does promise to outperform, especially if the raingods keep showering their blessings. However, one should not get carried away, as here too, the recovery may not be as fast as one expects it to be. Also, valuations have soared to levels where one may not be too comfortable buying stocks. There is more likelihood of the market falling then rising from current levels. So, wait for a while before forming a broader view on the markets.
In New York, the US financial markets were closed on Friday for the July 4 holiday.
The European markets ended nearly unchanged on Friday, as most market players chose to remain guarded at the end of another bad week, after a few economic reports put a question mark on claims that the global economic slump may be moderating. What made the matters worse was lack of cues from the US markets, which were shut on account of the Independence Day holiday.
After rising sharply on Wednesday, a worse-than-expected US jobs report dealt a blow to recovery hopes on Thursday and pulled European shares sharply lower in the afternoon of that session. On Friday, the pan-European Dow Jones Stoxx 600 index finished almost unchanged at 204.08 amid low volumes.
The UK's FTSE 100 index ended 0.1% higher at 4,236.28, while the French CAC-40 index rose 0.1% to 3,119.51, while the German DAX index slipped 0.2% to 4,708.21.
The Dow Jones Stoxx 600 index, which is a regional benchmark, fell 0.2% on the week after reports showed that unemployment in Europe and the US rose. The regional stock benchmark is down 4.8% since June 12 on speculation that the recent spurt in share prices has been overdone without a commensurate improvement in the economic outlook.
National benchmark indexes fell in eight of the 18 western European markets last week. The UK’s FTSE 100 slipped 0.1% on the week, while Germany’s DAX dropped 1.4%. France’s CAC retreated 0.3%.
Unemployment in the 16-member euro region increased to 9.5% in May from a revised 9.3% in April, the European Union (EU) statistics office in Luxembourg said this week. The US unemployment rate rose to 9.5% in June, the highest since August 1983. A separate report showed confidence among US consumers slipped unexpectedly in June. The Conference Board’s sentiment index decreased to 49.3 from a revised 54.8 in May.
Data released on Friday showed the second straight month of expansion for the UK services sector in June, though the reading was below consensus estimates. Euro-zone retail sales fell 0.4% in May and the Euro-zone June composite PMI increased to 44.6.
In last week's other important development, European Central Bank (ECB) President Jean-Claude Trichet signaled that the central bank has no immediate plans to cut interest rates again and said the euro region’s economy will start to recover in the middle of 2010. The ECB kept its key lending rate at a record low of 1%.
Asian stocks fell last week, the second weekly decline in three, as government data in the US and Europe revealed that the labour markets in two of the world's biggest economies remains in doldrums.
The MSCI Asia Pacific Index lost 0.8% last week, retreating from last weeks 2.2% gain. That pared the regional stock benchmark's record 28% in the three months ended June 30 on optimism that the global economy is stabilizing.
The Asian stock benchmark has now climbed 47% since reaching a more than five-year low on March 9.
The BSE Sensex surged 257 points at 14,915 after touching a high of 14,946 and a low of 14,499. The index had opened at 14,553 against the previous close of 14,658.
The NSE Nifty surged 75 points or 1.8% to shut shop at 4,424.
Asian markets ended mixed; the Nikkei index in Japan slipped 0.7% at 9,816, Australia's S&P/ASX ended down 1.2% at 3,828. Hang Seng index gained 0.2% at 18,203.
Elsewhere in the Europe, stocks were trading in the red. The FTSE index was flat at 4,234. The DAX index was flat at 4,716. CAC 40 index was down 0.3% at 3,106.
Coming back to India, among the BSE Sectoral indices BSE Bankex index was the top gainer gaining 2.2%, followed by the BSE Capital Goods index up 2.1%, BSE Pharma index up 2% and BSE Power index up 2%.
The BSE Mid-Cap index ended marginally higher by 0.8% and BSE Small-Cap index was up 0.3%.
In the Sensex, the major gainers were HDFC, Tata Steel, JP Associates, M&M, L&T, SBI, ICICI Bank and Reliance Infra.
On the other hand, major losers were Hindalco, Hero Honda, Sterlite, RCom, Grasim and DLF.
Among the big gainers in the broader market were Jain Irrigation, Shriram Transport, Glenmark, Chambal Fert, IDFC and Ashok Leyland.
Outside the frontline indices, the top losers included GMDC, REI Agro,KSK Energy, Jai Corp, Bhushan Steel, Apollo Hosp, BEML and Exide Ind.