Budget 2012-13: Market may remain range bound ahead of Q4 results: BofA-ML

In an interview to CNBC-TV18 Jyotivardhan Jaipuria, heead of research at BoFA Merrill Lynch said Budget expectations were low. He further states that looking at the subsidy numbers in the Budget one can assume that oil prices will be increased.

This year the Budget is a bit more realistic than it was last year because last year it was missed by quite a wide margin. This year the miss should be hopefully lower, said Jaipuria. Also see: See fiscal deficit at 5.6% in FY13: BofA-ML

Below is the edited transcript of her interview with CNBC-TV18's Udayan Mukherjee and Sonia Shenoy Mukherjee. Also watch the accompanying video. Q: What is the general refrain you hear from your investors? How did they take the Budget because the market reaction is not been great for the last couple of days? A: I think the expectations were low in the Budget and the Budget did not surprise either way for the market. To that extent Budget is getting a bit of non-event for the markets in the last few years because there is quite a bit of transparency and lot of reforms needs to be done outside the Budget. The Budget has laid the roadmap, if you look at subsidy numbers he has put in, there is implicit assumption that oil prices will be increased. The issue is whether they can do it, how soon they can do is and the quantum of the oil price increase which they can do. Q: What are the numbers that you are working with for the fiscal deficit and for the government borrowing programme for FY13? A: We have got higher fiscal deficit and what the finance minister has forecasted is 5.6%, which assume some increase in oil prices but maybe not as much as the finance minister has built-in. Correspondingly we got a much higher borrowing number than what the finance minister has got. If you look at last year versus this year, probably this year the Budget is a bit more realistic than it was last year because last year it was missed by quite a wide margin. This year the miss should be hopefully lower but I think we will still miss it because it will be difficult to contain the subsidy number to what the finance minister is aiming for. Q: Given that you are expecting government borrowing of Rs 5.4 lakh crore do you think bond yields will continue to remain fairly high and sticky like they have been last couple of days? A: I think 8.5% is where we think it will be at the top end. Our call is it will be somewhere between 8% - 8.5 % and probably this borrowing number has taken it closer to the upper end of that range. Q: How do you think the Reserve Bank of India reads the Budget? Will it be able to move on April and then move subsequently beyond that or have you cut your expectations of interest rate cuts for this calendar? A: We still are building in a possible rate cut in April though it