Fiscal roadmap cheers markets

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After a very lukewarm response to the Union Budget yesterday, the Indian markets seem to have celebrated the economy’s fiscal tightening in today’s session. While auto stocks took the cake, heavyweights across sectors seem to have enticed investors in today’s session. Right from the start of the session, the benchmark indices went on to add to their gains and ended firmly in the positive. While the BSE-Sensex closed higher by around 623 points (up 3.5%), the NSE-Nifty closed higher by around 189 points (up 3.5%). Both the BSE Small cap and the BSE Midcap indices closed firm (up 2.3% and 3.2% respectively).

As regards global markets, Asian indices closed positive today while European indices have also opened on a positive note. The rupee was trading at Rs 44.92 to the dollar at the time of writing.

The deputy chairman of the Planning Commission Mr. Montek Singh Ahluwalia, today assured that the Union Budget's target to slash the economy’s fiscal deficit to 4.6% of GDP is achievable. While many economists have derided this goal as being too optimistic, Mr Ahluwalia has contended that the same is achievable even if crude oil price averages at US$ 100 a barrel for the year. With such assurance, the fiscal roadmap for India seems to be on a firmer footing and makes a better story for the economy’s robust long term prospects.

Meanwhile, SBI, the country's largest lender, received subscriptions for Rs 85.8 bn for a bond sale, or more than 8.5 times the minimum on offer. The state-run bank aimed to raise Rs 10 bn, with a greenshoe option for an equal amount. However, the bank said in its prospectus it had the option to retain up to Rs 100 bn if subscriptions from retail investors were more. The bank, which along with its associates controls about a quarter of all loans in India, is raising the money to meet its loan growth. Bank loans recoded growth of 23.9% until February 2011 marginally exceeding the RBI’s target for the fiscal.

The budget proposals were also positive for the country’s largest power projects financer Power Finance Corporation (PFC). The company is reportedly targeting 26% YoY growth in disbursement for the current fiscal. It is also planning to set up a 100% subsidiary for renewable projects. The company plans to raise up to Rs 53 bn through the ongoing infrastructure bonds public issue for the purpose of funding its loan growth.