Financial Daily from THE HINDU group of publications
Friday, Jul 09, 2004
Industry & Economy
Chaos after the wait
THERE was so much of hype created for the budget. The wait is over and the event has passed. Now the experts in various fields start giving their expert comments and criticism. These judgments would be the outcome of how that individual or his business has been affected by the proposals in the budget.
I doubt very much that due consideration is given to how the various proposals would benefit the economy in the long run. And people have only heard the finance minister's speech.
Actually, one really needs to go through the fine print to really understand the impact, which for any professional would take at least a week. So, whatever comments one reads or hears is based on incomplete information.
The markets fluctuated in a big way. Markets going up signify that the budget proposals are market friendly and their going down signifies market unfriendly proposals.
But then why so much of volatility? Up then down and then up and down again.
The fact is that no one really understands the impact of the proposals. Excise duty on steel increases and the steel stocks start falling. Those selling don't even know to what extent profitability will be affected. Everyone is confused and filled with fear and greed. Everyone is waiting to make a quick buck by taking advantage of the market movements.
There was this important upcoming event "The Budget" and punters had taken positions in the market to make a quick buck. The event has passed without major implications and there is chaos.
The only impact on the markets going down, as I see it, is the introduction of the turnover tax. This has hurt the punters very badly. And that is the reason for the change in the market sentiments.
The turnover tax is really good for the healthy development of the capital markets in the long run. First, it discourages heavy speculation, which is creating this mad volatility.
Secondly, revenue is collected from an activity, which is not adding economic value.
Investing is always for the long term and today such speculative activities have destroyed the investment culture. This is creating huge volatility and scaring the genuine investor away. This is a good step but the markets react adversely. Observe the madness of the markets.
(The author is Managing Director, Parag Parikh Financial Services, Mumbai.)
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