Union Budget may be more hype than matter for markets

While history suggests that the Union Budget's influence on the market's short-term performance is declining, the next Budget could still leave a trail of impact, says Morgan Stanley

Even as finance minister Arun Jaitley is busy meeting stakeholders in preparation for this years Budget, its influence on the stock market, according to history, is declining since the 1990s when it was the platform to announce reforms. "This is where this year's Budget could mark a difference from recent history. However, the market is up against really strong history," says Morgan Stanley.


According to the research note, while history suggests that the Union Budget's influence on the market's short-term performance is declining, expectations (measured by pre-Budget performance) are still important in deciding what the market does after the Budget. "If the pre-Budget returns are positive, there is a 90% chance that the post- Budget returns are negative. As the Budget is on 10th July, the index level from where pre-Budget one-month performance is being measured is 25,474. Whether the Budget proves to be an inflexion point or not only time will tell, but one thing is almost certain – the market participants will have to deal with a fair amount of volatility on Budget day," the report added.

Morgan Stanley says, 2006 was the only instance in history when both the pre- and post-Budget returns were positive. India has outperformed emerging markets (EM) on a pre- and post-Budget basis on only two occasions–2006 and 2010. Again, attributing these to the Budget may be difficult, the report said.


The upcoming Budget could be important because of where India is placed cyclically, what the mandate for the government implies, and given that this is the first non-Congress government in a decade, Morgan Stanley said.



Yerram Raju Behara

3 years ago

Budget cannot provide ready answers for legacy issues. If it broadly conforms towards reaching its promises, then post budget rally should be equally positive on the stock markets. Today's challenge is the rising oil prices in the wake of Iraq war and uncertain supplies, on one hand and the delayed if not failed monsoon leading to a dip in food and cereal crops in the next season. As a consequence the recent inflation expectation survey of the RBI could reverse getting back into the dilemma of growth versus inflation-combat.

SEBI bars Nikhara Bharath, directors from raising money

Nikhara Bharath Construction and its directors were found collecting money illegally from investors under its grow tree and tree booking schemes, SEBI said

Market regulator Securities and Exchange Board of India (SEBI) has barred Nikhara Bharath Construction Co and its directors from raising fresh money from investors from its collective investment scheme (CIS).


SEBI found that Nikhara was engaged in fund mobilising activity from the public, by floating 'collective investment schemes' -CIS without obtaining certificate of registration from the regulator.


The regulator received a complaint in April last year alleging illegal mobilisation of funds from public by the company under its 'Grow Tree Scheme'/ 'Tree Booking Scheme'.


In an order, SEBI has directed "Nikhara and its directors -- Kodandarama Pilliah Bharathi Balakrishna Murthy and Sreedevi Balakrishnamurthy--not to collect any money from investors from its existing 'scheme'or to launch any new 'scheme'."


It also asked the company "to immediately submit the full inventory of the assets owned by Nikhara out of the amounts collected from the "customers"/ investors under its existing scheme."


SEBI has barred the company from disposing of any of the properties of the existing scheme. It also prohibited Nikhara from diverting any funds raised from public, kept in bank account(s) and/or in the custody of the company.


The regulator has asked the companies to furnish all the information sought by the regulator within 15 days, including, details of amount mobilised and refunded till date, scheme wise list of investors among others. These directions shall take effect immediately and shall be in force until further orders.


"The fund mobilising activity of Nikhara, which is in the nature of a CIS...Has been camouflaged by Nikhara by terming it as a 'real estate development and sales business' only to mislead and attract investment from general public," SEBI said.


IB clearance mandatory for private person before becoming OSD

The Modi government has also asked all its ministers not to appoint officials who had served as personal staff of former ministers in the erstwhile UPA government

The Indian government has made Intelligence Bureau (IB)'s clearance mandatory for appointment of a private person as officer on special duty (OSD) to a minister.


In a directive, the Department of Personnel and Training (DoPT) has asked ministries to send a proposal including approval from the concerned minister, willingness of the person to be appointed as OSD and educational qualification certificates (attested by an officer not below the level of Under Secretary) to it.


Besides, it has been made mandatory to send to the DoPT the biodata or earlier service details of the candidate duly attested by the minister concerned, post creation details with the approval of DoPT and the Ministry of Finance, IB report and police report on verification of character and antecedents for processing requests for appointment of private person as OSD.


A clearance from IB is not needed in case a government official being appointed as OSD to a minister, according to the directive.


As per procedure, the final appointment of OSD will be made after the approval of Appointments Committee of Cabinet (ACC).


In a related development, the new government has asked all its ministers not to appoint officials who had served in key positions in the erstwhile United Progressive Alliance (UPA) government as former ministers' personal staff.


This comes after a recent controversy over appointment of private secretaries to three Union ministers, including Home Minister Rajnath Singh.


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