As the budget progressed, the Sensex took a reverse turn

Posted by dreamz2achieve on 7/08/2009

Indian Budget 2009 presented on 6th July by Pranab Mukherjee from the inside of Parliament House, New Delhi was one of the most awaited budgets (atleast in my lifetime I haven't seen a more awaited budget).
The atmosphere was perfect for hearing the budget. We were seated comfortable in front of the television - me, my father and brother. Both of them with a notepad in hand to jot down as soon as the words start flowing from our respected FM. The elation, surprise, enthusiasm and other extreme feelings related with budget were slowly and slowly washed away from each one of us as the budget progressed.

Our expectations from the budget were
We expected that through this budget, government would show their full support to the country in the fight against this horrifying period of economic slowdown. I would like to enumerate the expectations as follows:
  • Relief to industries suffering from slowdown
  • Stricter norms to ensure Corporate Governance
  • Greater tax holidays to individuals to increase their buying power
  • Means to promote tourism industry in India
  • Infrastructural growth - both urban and rural
  • A hint of disinvestment

To be more closer to the actual spirit of expectations from the Budget 09, we were expecting a booster dose, a plan which would put the Indian economy on an accelerated path to growth.

Cant understand these features of Budget 2009

  • Full tax deduction for donations to political parties

Full tax deductions for PM's fund to cope natural disasters or other mishaps always made sense, but tax deduction for donations to political parties just does not seem to sound right. They surely do not use any of the funds for charity or other noble purposes, but instead splurge extravagantly on election campaigns when half the country is on the brink of loosing jobs. I am wondering that why isn't there any uproar around this feature of budget 09. Why isn't the ever ready media talking about this feature and keeping it dormant. Even in these difficult times, all government could think of was its own party welfare.

  • Abolishing Fringe Benefit Tax

Can't seem to understand that is it a boon or a bane or a no-effect for the general public. The tax which was till now being recovered through FBT would be recovered in most cases under the head of taxes on perquisites. Moreover, if it was to be abolished at this time, then why was it implemented in the first stage?

Why did SENSEX take a reverse turn

First of all, a general query to all, did the sensex had any reason for reaching 14000 pts again in such a short time period in this scenario. The job market is bad, loads of people are jobless at the moment, people with jobs are not sure how long do they have the job, buying power of the public is at an all time low, inflation is almost zero, industrial production is down, etc.

I believe that in the answer to the above query lies the reason behind reverse turn of Sensex after budget. After much thought, the oly reason I could come up for the above query was - Sensex is going up and has reached 14000 pts just in the hope of an accelerating economic growth and this hope was infused into the market from the results of LS elections 2009 which gave India a stable government lead by an intelligent and a highly educated PM for the next 5 years. This is clearly shown by the graph below, wherein the market started picking up right from the time of LS elections.


Now, lets come back to the original question - why did the Sensex take a reverse turn as soon as the budget was announced? I believe that the reversal in Sensex was attributed lesser by the presence of certain features in the budget and more by the absence of expected features in the budget.

The ladder of hope on which the Sensex had climbed up till 14000 pts was crashed by the budget 09.


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