'Budget fell short of expectations'

Mitesh Mehta, director, K G Vora Securities

The market reacted adversely to the Union Budget for the year 2002-2003 presented by the Finance Minister Yashwant Sinha. A good part of the 143-point fall in the BSE Sensex was attributed to the violent situation in Gujarat. Had the problem not arisen in Gujarat, the overall loss in the Sensex would have been modest.

Overall, the budget fell short of expectations, which – in the first place – were not very high. Withdrawal of dividend tax exemption affected the sentiment. The cut in interest rates on small savings is also less than expected. The cut in excise duty on tea will help tea stocks in the short term.

Barring these announcements, there was nothing extraordinary about the budget. This, along with the fluid situation in Gujarat, affected the sentiment of the market. Operators, who built positions in the run-up to the budget, took the opportunity to book profits. The selling pressure was almost across the board and not necessarily restricted to the sectors likely to be affected due to budget proposals. For example, the entertainment industry is likely to be benefited by the budget proposals, but almost all media stocks ended lower.

The market may remain weak for a while with the possibility of communal riots spreading to other parts of the country. However, after a sell-off, I expect fresh buying to come at the lower levels. If things in Gujarat come under control by the weekend, the market may recover next week.

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