No pre-Budget stock rally this time
The Indian stock markets have typically seen fairly sustained pre-Budget rallies — but for this time. The sharp spike in crude oil prices, which hit $117 per barrel last Thursday, have left investors skittish.
Given how vulnerable India is to rising oil prices the mood is almost bearish. Although the Sensex bounced back last Friday, it gave up nearly 3 per cent during the week and the benchmark index is close to 16 per cent down from the highs of 21,005 seen last November. Even before oil prices breached the $100 mark, foreign investors were taking risk off the table, not convinced that the government would be able to rein in inflation, which is ruling at above 8 per cent for more than a year.
Investors were also not sure if the government would be able to push through projects, needed to spur the investment cycle and take action on the policy front even as fixed capital formation is slowing down sharply in the six months to March 2011.
The mood in the market is one of complete circumspection, with expectations from the Budget tempered like never before. There is some apprehension that given the state of the government’s finances, there could be a 2 per cent hike in central excise duties – at a time when the government needs to splurge on social-welfare schemes ahead of elections in five states later in the year. What is also worrying the Street is that government borrowings, estimated at a net Rs
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