Lacklustre budget pulls down mkts, Sensex tanks 329 pts

The stock markets, which were on a high on anticipation of stimulating measures for the industry and some tweaking in tax structure, tanked 320 points on the benchmark Sensex on BSE as the interim budget turned out to be a damp squib.

With investors exercising caution, the markets opened weak before the presentation of interim Budget by finance minister Pranab Mukherjee at 1100 hours in Parliament.

As Mukherjee, who holds the portfolio of finance minister, went on reading out the Budget papers on Parliament the Sensex plunged into deeper red as the Budget fell short of the investor expectations.

Besides a lacklustre Budget, sluggish Asian markets also contributed to across-the-board selling pressure. The BSE barometer finally closed the day at 9305.45 points, lower by 329.29 points, the biggest drop since February 2.

Realty stocks, which bucked the trend surged in early trade on anticipation of emphasis on real estate and hospitality sectors in the interim Budget, however ended the day with heavy losses.

As the interim Budget fell short of market expectations, selling pressure gained momentum and spread across the wide front which saw all sectoral indices ending in the red.

"Euphoria was built up in the market last week ... but the government took a conservative approach, and has presented an interim statement. It did not want to expand its fiscal deficit by announcing any further fiscal stimulus," SMC Global vice-president Rajesh Jain said.

External affairs minister Pranab Mukherjee, who holds the charge of finance ministry, presented the interim Budget that made no change in direct and indirect taxes or unveil any stimulating measures for the industry as was widely expected.

On the other hand, brokers said investors are concerned over the rising fiscal deficit which has been revised at 6 per cent of the GDP against 2.5 per cent in Budget estimate. Revenue deficit also placed at 4.4 per cent against 1 per cent in the estimate for 2008-09 augmented their concerns, they added.

"We term the budget a disaster; instead of bringing cheers for (the) common man, they have rather exercised caution saying that the next government will have to live with a high fiscal deficit," Arun Kejriwal, director, Kejriwal Research and Investment Services, said.

With a "disastrous" budget offering nothing for the industry, metal, realty, banking, capital goods, refinery and power sectors suffered heavy losses in range of over 4percent.

RIL led the fall and closed lower by 3.42 per cent. Blue-chip ICICI Bank was another big loser at 5.79 per cent. Jaiprakash Asso at 7.88 per cent and Rel Infra at 6.35 per cent were other major losers among the elite club.

Metal stocks index took a heavy beating as the sectoral shares, particularly Tata Steel, were battered. The BSE metal stock index at 4.75 per cent was the biggest loser among all indices on Monday.

Citing the reason for heavy fall in metal stocks Taurus Mutual Fund managing director RK Gupta said, "Market was expecting imposition of additional duty on steel imports which did not happen and sector went down."

Realty stocks were the next biggest loser with their sectoral index losing 4.58 per cent after the interim budget dashed hopes of any sops for the sector.

Experts said the the budget belied investor expectation of policy changes in the interest-rate sensitive sector.

"The government has not announced anything specific for interest rate sensitive sectors as it has left room for RBI to take corrective measures. I will not be surprise if the RBI comes out with rate cut by this week-end," Taurus's Gupta said.

Shares of another interest rate sensitive sector banking were also battered as the government had not only no major policy decision in the budget but on the other hand indicated that the cost of borrowing might go up.

"With bond yields hardening, fund raising by banks would become costlier. This is the major negative news for the banks," Ashika Stock Brokers Research Head Paras Bothra said.

Brokers said they expected the market to remain range bound with downward bias for couple of weeks.

The total market breadth turned sharply negative with 1,598 losers against only 776 gainers on the BSE at close.

The trading volume dipped to Rs 2,908.21 crore from Rs 3,103.17 crore on Friday. RIL topped the list of highest traded share with the turnover of Rs 239.94 crore.

The BSE-100 index also plunged by 167.89 points or 3.43 per cent to 4,732.85 from 4,900.74 previously.