Congress was never expected to do handsomely in UP election. But its flat performance was little below par than expectations. And more than that, the SP performance was a surprise. Probably it teaches Congress one thing at least - how to play populism.
Inspite of all provisions of quarantined ecosystem for Budget team, it is foolish to assume that no tweaking will happen to budget provisions post the election result. Govt. is facing fiscal as well as governance deficit. Direct taxes might be spared and indirect taxes could be tinkered higher. Higher duties for diesel cars looks very much on the cards. Higher FDI in retail, insurance looks remote.
Market has welcomed additional liquidty coming by way of surprise 75 bps CRR cut by RBI. Probably RBI will do not anything now on 15th mar and wait for directions on fiscal consolidation by FM on 16th mar. The structural issues have remained, inflation is staring up again with railways hiking rates, crude remains upwardly bound, global weather forecasters have predicted below normal monsoon rainfall. All in all, market is just reflecting short term trading speculation & parking of global liquidity in Indian markets for now.The short term up movement is also reflective of the expectations of new investments schemes at the onset of 12th five year plan. If the budget is non-consequential, which could well be the case, we could see a dip in market levels. Inspite of the election setback, Market seems to be just living for another day, the Budget day.
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