The Union Budget is an important policy document that goes on to shape the growth of the nation and has the ability to make or mar the prospects of capital markets. So, the need to read the fine print and understand the implications is well-established. But the hype and the obsession associated with it escapes my understanding.
In the age of Facebook and Twitter, media and their guests will be under tremendous pressure to dish out stories and conclusions ahead of the competition. As a result, a lot of half-baked stories will get dished out. What else can you expect when neither the anchor nor his guest has read the fine print?
Because of the hype generated by the media, traders and investors all will be glued to the idiot boxes and their cellphones. And they are likely to be cajoled into putting a trade, which, most probably, will result in a short-term loss.
A study of the last 26 Budgets reveals that barring one instance of 1991, in all other 25 instances, shares were available at a price lower than the Budget day in the remaining part of the calendar year. So, where’s the hurry? You will do well to read, absorb, understand and then act, and that too, if needed.
In fact, the Budget day is just one of those several data and policy points that an active investor has to monitor. There are quarterly results every quarter. You also have the monthly data on inflation, unemployment, production, despatches, core industrial growth, IIP, trade balances and quarterly GDP. The Reserve Bank of India (RBI) holds four quarterly policy meetings and four mid-quarter reviews. And you have as many meetings of the Bank of Japan (BOJ), the European Central Bank (ECB) and the US Federal Reserve.
But the most important factor to watch is whether the global risk on rally will continue. Bernanke has assured in his testimony on Tuesday that he will continue to loosen the purse strings, but a non-compliant government in Italy could spell trouble for the EU. And what ails the EU will not remain in the EU. It will land in the US as 10% of the S&P 500 revenue and 20% of the Global World Product is accounted for by the EU.
In order to make money in this market, you will not only have to watch whether Chidambaram will kickstart the dormant economy, but will also have to keep a strict round-the-year vigil on what the world does, including our northernly neighbour across the Himalayas.
The writer is head of business, private broking and wealth management, HDFC Securities