Business as usual, as is wont everytime

Deepak Mohoni: Managing Director, trendwatchindia.com

If it ain’t broke, don’t fix it.” That seems to be the FM’s maxim when making the Budget of the world’s second-fastest-growing economy. And inevitably, the Budgets are praised as “well-balanced” by the accompanying media circus.

The stock market’s reaction to the Budget lasts for just the duration of the speech, when the Sensex becomes a snickometer for every delivery bowled by the FM. Once the Budget is over, it is business as usual - which these days means a return to the general global trend.  The largest move today was the 300-plus-point crash, which lasted nine minutes after the hike in short term capital gains tax was announced. By the time the session ended, the market started recovering, in keeping with the rend in Europe at that time.

This is no different from the last few Budgets, when the market continued in the global direction before and after the event.

Going back a year, the Sensex had fallen from 14,724 on February 2 to 13,479 on February 27 — the day before the Budget, and then further to 12,344 by March 5. A strong rally developed thereafter, coinciding with a change in the global trend.

Ironically, our stock market has reacted more sharply to statements by the US Fed chairman than our own FM. It has also reacted much more to economic data related to the US economy than to ours. There has been much talk of a “decoupling” between the global trend and ours, but the price movements of stocks show absolutely no evidence of this.