On the interim budget day, the Sensex plunged to close at 9305 and the Nifty closed at 2848.
Among the 30 Sensex components, 29 stocks ended in the red. Only ITC held up. The major laggards were JP Associates, Reliance Infratructure, ICICI Bank, RCom, Tata Steel and RIL.
All the major BSE sectoral indices ended in the red. BSE Metal, BSE Realty, BSE Bankex and BSE Capital Goods were the top losers.The small and mid cap indices also closed lower.
Gaurav Dua - Head Research , Sharekhan Ltd. said that the interim budget failed to meet the expectations of certain measures aimed at providing a stimulus to economic growth through fiscal concessions to some industries. He also said that the finance minister maintained status quo on the direct and indirect tax structure and the fiscal deficit estimates of 6% for 2008-09 at the center level are higher than street expectations.
But Navneet Munot, CIO, SBI Mutual Fund, expressed surprise on the hype built ahead of the interim budget. "In view of constitutional propriety and also given the state of government finances, nothing much should have been expected from the interim budget," he said. "The new elected government would mostly be in place by May 09 and will present a full-fledged budget for FY 2009-10".
The Finance Minister re-iterated the government's commitment towards higher outlays for rural, social and infrastructure sector. But it is obvious that the Fiscal Responsibility and Budgetary Management (FRBM) targets have been thrown out of window. The revised revenue and budget deficit at 4.4% and 6% of GDP for FY 08-09 don’t include off Balance Sheet items like bonds issued against food , fertilizers and oil subsidy. Neither does it include the state government deficits.
"Our fear is that actual deficit number for both 2008-09 and projected numbers for 2009-10 could be even higher as economic growth slows down," says Munot. "Incremental expenditure on account of pump priming the economy and further slowdown in tax revenues could lead to deficit inching up further."