Union Budget 2013 - 14: Advantage bulls, bears have to sulk in a corner for now

It is a big day for market. Finance Minister P Chidambaram will present one of the most highly anticipated Budgets of recent years today, a blueprint for austerity that forms the centrepiece of India's efforts to stave off a damaging credit ratings downgrade.

The 2013-14 Budget caps an intensive seven-month campaign by the energetic Chidambaram, who was appointed last August, to turn around the fortunes of Asia's third-largest economy after years of policy drift and global economic turmoil.

Economists say he may also unveil measures to widen the tax net to boost government revenues, lay the groundwork for a goods and services tax, reduce the government's huge subsidies bill, sell more stakes in state-owned enterprises and raise import duties to dampen demand for gold.

The biggest number everybody will watch out for in the Union Budget today will be the fiscal deficit numbers for the current year. The Finance Minister P Chidambaram has already said 5.3 percent for this year and 4.8 percent for next year will be the fiscal deficit. Economists believe that the FM will stick to 5.3 percent, so that the FM can promise even 4.7-4.6 percent for next year on a higher base it is easier.

Investors will watch closely to see whether the three-times finance minister - seen as a possible candidate for prime minister in 2014 - will fulfil his promise of fiscal prudence or sow the budget with vote-winning, but expensive, welfare handouts.

There are some who believe that the FM might want to surprise the market with a 5.2 percent this year and a 4.7 percent next year. If he does anything like that, it will be seen as extremely positive by the market.

However, the market is more worried about the exact fiscal deficit number because the exact government borrowing number will depend on that. There the guesses are between Rs 5.1 and 5.4 lakh crore.

Well known market expert Ramesh Damani believes bold moves are needed from the FM on the fiscal consolidation. He says negatives are priced into the market post the February correction. "The midcaps are correcting due to funding crunch," he told CNBC-TV18 in an interview.

Damani sees a good probability of a market rally post Budget. But he adds tight liquidity may pressure midcaps until March 31.

International Markets

Asian stocks have rebounded sharply in trade today helped by the Wall Street rally overnight and with the Yen easing back against major currencies. Bernanke reaffirming his support of the central bank's stimulus policy, upbeat earnings and economic reports supported the gains.

The Dow ended at 14,075.37, up 1.26 percent. The S&P 500 jumped 1.27% while the Nasdaq advanced a percent.

Thank heavens for Ben Bernanke, says Udayan Mukherjee, managing editor of CNBC-TV18. "He (Bernanke) has given us the lift that we required in the morning. We are not going in with global depression and if the morning shows the day hopefully we will come out of it alright," he commented on the channel.