Two trading sessions symbolized the week. first, the budget session and second, the Friday session. On first, Sensex zoomed up 178 points on what seemed a nirvana budget. Industry exalted and markets virtually danced to FM tunes. However, the next day, in afternoon trade, the bears became active and than from than on, till Friday, only bears danced on Dalal Street. Sensex lost 176 points on Friday. In totality, the Sensex lost 27 points this week, not a befitting salute to a reasonably sound budget, we would say.

Coming to the basic structure of budget, the FM has tried his best to push up the growth. Two steps underline this intent. First, the rates on contractual savings have been slashed by an ambitious 150 bp. Even though the real economic validity of the move is rather suspect, the basic fact remains that it marked a strong message to RBI to decrease rates further. RBI acted quick and slashed the Bank rate by 50 bp. Fears on currency front might have forced him not to go further. Now the ball is in court of banks. Second step, which though will act indirectly, is the removal of tax surcharge. The step was not highly expected and is in line with the classical supply side medicine to avert a recession. Whatever it is, the move, along with decrease in dividend tax, will provide reasonable amount of money in India Inc.’s pocket and the next logical move is that the India Inc. steps on the investment accelerator. Genuine attempt to revive industrial growth.

Coming on to capital markets, perhaps most important decision has been to increase the FII limit from 40% to 49% and this will give FIIs more room to play. But the price movement in new economy does not seem to be supporting the view and as such, the week has closed on an indeterminate note. The new economy was bulldozed on Friday and now even the basic valuation norms are not in reckoning if we search for support levels and bargain hunting. None of the software scrips has been respected by bears and the scene is not much different in telecom and media.

Coming on to next week, the markets are now very much open, both for further downfall, in case of adverse development on NASDAQ and for upward move in case of bargain hunters entering the market. So the scene in new economy will continue to be chaotic. Old economy, on other hand is expected to remain rangebound. The direction remains uncertain but the volatility might come down now and as impact of budget on individual companies become clearer, the prices might settle in a trajectory. We might expect some sanity in old economy price movements.