Budget 2010-11: Not a game changer, says Vibhav Kapoor

Here is a verbatim transcript of the interview.

Q: ITC is down almost 7% and preliminary analysis is showing a huge impact for them by way of excise, the range varies but it could be as high as 15% or more than that, what have you made of what the Budget delivered and how would you approach ITC now?

A: Overall, the Budget was as per expectations. It is a continuation of what the government started last year. So lot of expectations on the positive side have been met but having said that it is not something which is a game changer. While I think the fiscal deficit number was good but again it was in line with expectations—a gross borrowing of 450,000 crore. You had the positives of the personal taxation, corporate tax change a little bit on the surcharge.

So all in all I think it is a continuation of the previous Budget of the government. So I don’t think this can change the overall longer-term market situation. Obviously the initial reaction as we said in the morning could be positive because the markets had not run up before the Budget this time. I still continue to maintain that the range will hold which means that we are in that broader range of 4,700 to 5,200-5,300 that will continue and the smaller range maybe uptil 5,000-5,050 where the market could meet the significant resistance.

Q: How are you reading this because we are still within shouting distance of 8%, there is no great fall in the bond yield as such after that number, while the stock market is rejoicing, the bond market seems unmoved?

A: I think that is exactly the point. The number is not lower than what the market had expected, it is in line with what we had expected which was gross borrowing of around Rs 4,50,000 crore which is the number which the Budget has delivered. But also in addition to that you now have this hike in or likely hike in petrol and diesel prices by a reasonably significant percentage which will fuel inflation going forward maybe about by 1% point and that is never good for the bond market. So I think a lot of this Budget euphoria is really the fact that people had very low expectations from it and there were a lot of apprehensions as it now seems. None of those apprehensions have come true and therefore you have a big sense of relief.

The bond market I think—you normally don’t get that sort of euphoria, you don’t get that sort of short-term reactions as you get in the equity markets and that probably explains why the bond market is not than anything much after the Budget.

As far as the equity markets are concerned, I think as I said earlier it is probably an event which has happened which didn’t turn out to be negative as the market thought or feared and the market will forget about this in four-five days time and you will be back to your normal global factors and what is happening globally and that will decide the future trend of the market.

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