Udayan Mukherjee's take on Budget 2007

Union Budget, what's that?

For any beast of the stock market, there is one simple takeaway from this year's Budget: From next time, learn to ignore it, its just not worth the hype. Truly, P Chidambaram is no longer the reformer we once knew. In any case, his guns are now trained on other segments of the economy, maybe justifiably so.

He probably thinks the corporate sector and the markets don't really need much from him. Which is true. So its in the fitness of things that he dwells on making us a more inclusive economy, harps on education, infrastructure and agriculture. All laudable things. Just that, if you are market player, don't lose sleep over it. When you don't have expectations, you are not disappointed easily.

Having said this, a few budget moves rankle. The two tier excise on cement is downright foolish and regressive. Surely he doesn't expect cement companies to start selling at less than 190 a bag to pay less excise? And of course cement companies will pass this down, so cement will sell at a higher price which defeats the very purpose of such a move anyway. Hare brained. There's no argument against taxing IT companies, in principle, just extending MAT is a bit confusing. One it goes against the promise of the 10A/10B tenure and two, people may infer that 10A/10B may actually be extended, now that MAT is in! For people who were betting on a corporate tax surcharge cut, the budget is a shocker. The surcharge stays and companies will now have to effectively pay more tax. There's a new cess. The fine print will throw up how badly FBT on ESOPs will hurt companies who have active stock option plans. Seems like a harsh step. And then there is the baffling hike in dividend distribution tax. What sense does that make? Evidently, the corporate sector isn't his favourite son, this time.

There were glimpses of the reformer. Alas, just glimpses. Using our large forex reserves to fund infrastructure seems like an innovative step. Short selling and a lending and borrowing system are steps forward. But for someone spoilt on the diet of the 1997 budget, its too little. For a lesser finance minister, you may have called it an average budget, for Chidambaram it is disappointingly pedestrian. Anyway its over and done with now.

Next week, everyone would have forgotten about it too. Life will carry on. For the market, which has corrected quite sharply this month, there are bigger issues. The global situation has turned murky. That may hold the key to where we are headed in the near term. In the absolute near term , the market seems a bit oversold. There may be a bounce but after that it will probably have to spend some time in consolidation. Just don't forget the lesson next time: the Budget doesn't matter to your life in the markets. Leave the jumping around to the media, we have to do it for a living.