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Ready to shake off budget blues

Mumbai, Feb. 27: Rarely, if ever, in the past 12 years have markets leapt in the month immediately after the budget. Dalal Street mavens hope it will happen this time.

As expectations of a friendly budget peak ahead of finance minister P. Chidambaram's momentous Monday, there is nervousness that stocks would lose ground, pulled down by hopes not met, or fulfilled half way.

'The immediate effect on the market will be negative, come what may,' says NSE broker Ashok Ajmera, adding a lot has already been done in the run-up.

Chidamabaram has raised the limits on foreign direct investment in civil aviation and telecom. In real estate, the government scaled down the minimum size for developing real estate to 25 acres from 100 acres earlier.

A study done by a leading brokerage of trends over the past 12 years shows the market having lost a whopping 5.4 per cent after the budget. The exception in recent years was 1999, at the height of a technology rally.

Market operators are praying for the budget to take big strides on taxation and infrastructure. They realise that salaries, defence expenses, interest costs and subsidies account for 60 per cent ' and will, perhaps, stay that way. But, the optimism for change is still strong.

They want changes in tax rates that boost corporate earnings and reduction in excise duties which give manufacturers a leg-up. Another important item on the finance minister's agenda, they feel, should be infrastructure spending, the lack of which could slow growth.

Some say the hopes are unrealistic in view of the finance minister's resource constraints. The finances of states, too, are in parlous shape. Reserve Bank governor Y. V. Reddy has warned of the dangers of hot-money from foreign investors on several occasions. The last, but not the least troublesome, is the Left's demands.

'He's an intelligent person', says Ajmera. He points to the steps taken by the government over the past few weeks to increase the flow of funds to bourses through banks, Life Insurance Corporation and private provident funds.

The finance ministry will be emboldened by the fact that in the recent weeks, a slew of schemes floated by mutual funds have mopped up close to Rs 3000 crore. Many of these funds have even been selling shares now to buy later.

All that money is waiting to gush into stock markets once a correction sets in. This, mutual fund managers are hoping and praying, will happen after the budget.

Analysts say a fall allows them to buy shares cheap. Whether markets give the Dream Team (Manmohan-Chidambaram) a standing ovation will be seen hours from now.

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