The Hindu Business Line : Market may see psychological jam of sorts in short term

Weak trend: Electronic screen outside the Bombay Stock Exchange in Mumbai on Friday. The BSE Sensex dropped by about 358 points, after the Finance Minister, Mr P. Chidambaram, announced loan waivers worth Rs 60,000-crore for farmers in his Budget speech. –

Fortunately, ‘globalisation’ for emerging large democratic Indian economy still has a limited influence pockets like trade winds normally have on the overall climate; as they move into the interiors, the impact evaporates into thin air.

Dalal Street may have been mimicking some of the Wall Street habits or reflecting its moods in the recent years.

But when the market’s Budget response mechanism is linked to the global phenomenon, you know it is an excuse for inaction.

Psychological jam

Dalal Street may reflect a continuation of a psychological jam of sorts in the short-term. Market may choose to ignore, for some time at least, the boost to consumption that the Budget for 2008-09 has proposed.

The lure of possible larger revenues and profits is not tempting enough! Instead, Dalal Street may use the investment disincentives – rise in the short-term capital gains tax or the hint of more “moderation” in capital inflow – as spirit dampeners.

The market seemed predisposed for a status quo before the Budget. The market makers and traders admit that the greed has taken a heavy knock in the past couple of months or so. As long as it is not aroused, an uncertain and drifting trend could persist.

Budget factor

The country’s annual federal fiscal exercise after initiation of economic reforms has surely undergone a gradual change in the context of globalisation. But irrespective of the colour of the regime that led the Union Government none could hardly afford to ignore the domestic interiors, economic or otherwise. The aggregate democratic pull did not allow the policy exercises to go “global”.

It is a co-incidence that the current regimes in New Delhi and Washington presented their last Budgets before election in February in a year of market turmoil afflicted by a contagion.

Moon on a platter

As an extension of globalised wishes, did market expect moon, served on a platter? If the US Federal Reserves and the Government can, why can’t we? Why do we have to be “populist”?

Perhaps, to the discomfiture of many, the market may have been reminded that it does not represent economy, or perhaps, the market economy is still in the realm of futures.

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