FY10 fiscal deficit can even cross 6.8%: DBS Chola

Q: You heard him, you heard the slice of the finance minister's conversation - are you hopeful that in the short term as well which is this week you see market bouncing back again?

Sinha : It is quite likely because see the reaction has been extreme. If you look at the last one year the market has actually got use to living in extremes. We saw an extreme correction last year. We saw the way the market reacted to an extreme on the election verdict so maybe this was an extremely negative reaction to probably expectations after hinging up around couple of things such as disinvestment number. I do not think that is very central to the entire budget proposition. I think Mr Padmanabhan has a very valid point that the life of a government, the life of an economy is not just one financial year. So therefore if you can pump up the economy to get a better revenue next year why not do so. So this 6.8% fiscal deficit which is definitely the largest negative overhang in the market would be seen in this prospective. Sanity will return to the market and we will probably see a much more sober movement. I think that is where we should put our bets and not play for the short term. Probably this is giving an opportunity to people because a lot of investors were not able to come into the market because the rally has been so sharp. I think the corrections has been equally sharp so that is giving an opportunity.

Q: You and Mr Padmanabhan are making a point about the fact that this is a growth budget. There isn't much in it for the investor, is it?

Sinha: In terms of a direct stimulus to him, maybe not sure but then there is so much already there in the environment of incentives for the investors like he has not at all touched on the capital gains tax, neither the short-term nor the long-term which was an apprehension that he would be. In my opinion, the expectation that the securities transaction tax (STT) should be moderated, how many of us do actually look at the STT when we invest in the market. It is more to do probably for the arbitrager, who needs to work on that very fine margin that he has when he plays between the spot and the future. So therefore I think he has left things unchanged which itself is a relief and that is what we need to participate in.