The past few weeks have been volatile for the Indian markets. After scaling the highs of almost 18,000 in early January, the Sensex has fallen by around 9%. Current concerns are more global in nature. With European economies falling apart and the US situation becoming grim, global markets are staring at uncertain times in the short to medium term. And in being largely dependent on foreign inflows, Indian markets are dutifully toeing whatever's happening to global markets.
Of course, there is no dearth of concerns domestically as well. Rising inflation and interest rates pose the biggest risks for the Indian economy currently. And there are no real expectations from the upcoming budget as well. In fact we might see a partial rollback of the stimulus measures starting this budget. And that's most likely going to make the markets even more nervous.
With the Indian economy seen on a path to recovery, any measure towards partially withdrawing the stimulus must not come as a surprise. This is also given the strained balance sheet of the Indian government. With fiscal deficit staring at the 7% mark, there is no other way for the government to fulfill its spending program than to raise taxes. Therefore, taxpayers must not have many expectations from Mr. Pranab Mukherjee.
As for investors, a disappointing budget can serve as a good omen! This is because good quality stocks, which have become expensive after last year's bull-run, can again provide some value if they fall. As the Finance Minister had said last year - "A single Budget speech cannot solve all our problems nor is the Union Budget the only instrument to do so."
So it will be good for investors to lower their expectations from the budget. Investing carefully and with discipline will rather serve their purpose better.