The Hindu Business Line : Volatility, high volumes may prevail

Given the political and economic imperatives, it is understood by the Street, that the Budget and the esoteric policy initiatives by the Manmohan Singh Government cannot be exclusively capital market-friendly.

THOUGH trading comes to a halt after the specified hours, Dalal Street never goes to bed. The virtual market seemingly works overtime, more so before a Union Budget. The anticipation and news flow before the Budget put market instincts on an overdrive.

The week after, however, is kept for the cerebral exercise and swift readjustment in positions.

The Budget 2005-06 will not be an exception in respect of market's equations with the annual event. But this time, one feels, the psychological orientation is somewhat different.

The Street expectations distinctly appear not to be for just one financial year, but for a longer term as a trend-setter. Perhaps, the usual hyper sensitivity to short-medium term measures has given way to a kind of flexibility that allows even sacrifices to achieve long-term goals.

The expectations are geared towards measures for laying out a roadmap, lesser ad hocism, more freedom, procedural simplification and transparency.

According to market analysts and observers, pragmatism and innovation may be the novelty for the UPA government's first full Budget proposals.

While any measure that is inconsistent with the reforms process may affect the buoyant market sentiment, deferment of some expected proposals is unlikely to hit the indices negatively.

For example, if the anticipated raising of limits in voting rights for overseas investors in banks does not materialise, the bank index may miss a rally. But a crash in valuation may not be on the cards.

Indications available from the Economic Survey, the President's speech to Joint Houses of Parliament and even the Railway Budget suggest a healthy balance between economic thinking and realpolitik. A focused attention towards the farm sector and the growth impetus for industry and service sectors are well within the matrix of expectations.

The overseas funds, which have been giving the lead in the domestic stock market, would be reassured if the consistency in policy measures remains intact.

The investor community is likely to take in its stride the upward revision of securities transaction tax if the short-term capital gains tax benefit stays.

The benchmark indices, in the first few sessions of this week, are likely to move in tandem with the liquidity flow, while the mid-cap counters may react to the sectoral proposals emanating from the Budget. However, an inclination towards profit-taking is likely to run parallel this week even if the Budget is considered positive by the Street.

An overall volatility and higher trading volumes may mark the first week after the Budget.

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