Budget 2012: Government may end up surprising everyone, says Abhay Aima

Abhay Aima, Director, HDFC Securities told NDTV Profit that Budget 2012 could have greater impact than the previous budgets as the government may end up surprising everyone. “Upside in market will depend on the budget's solutions to economic problems, while downside in the market is limited doe to surplus liquidity,” he said.

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How do you think the mood is going to be on Friday when the finance minister will present the budget?
 

This time the budget is going to be pretty deliberate because of what is happened in the last two years and there are still two years left. The mood could swing quite widely, i believe, and the impact could be greater than most times in this year's budget.

Q: Are you watching the fiscal deficit number?
 

Everything will be looked closely because the government has two options now given what has happened politically. Either it can go with what has been the case in the last two years, one could expect and one would expect that action from the government for the next two years. Don't expect anything and just go by the fundamentals and rely on that. I guess that is the majority (view). There is a possibility that they will take up certain issues and end up surprising everyone.

How important it is from the market point of view?
 

The liquidity is humongous. For a bull market, you need liquidity and then you need fundamentals following up. The liquidity is certainly there.

Do you think it will continue irrespective of what the government does on Friday?
 

The downside is restricted because of surplus liquidity The fact that no one is really bullish, there are not many long positions, it’s not overbought per se worldwide, in liquidity people have been underweighted. 

Where it goes on the upside you need participation of domestic players, you need players who are waiting on sidelines to see if there is any policy action and that will determine what will be the upside. My call would be when the downside is limited the upside will determine which way the government or the finance minister decides to take on the problems of the economy, the macro problems like fiscal deficit, what is going to be done on the policy front. We have to see how the government is looking at them as that will determine the tone for the next two years. 

A lot people would disagree that the government will set the tone for anything?
 

Certainly, this has to be corrected on the supply side and this is the only time where policy decisions can be taken. It is not the end of the world. The economy is still performing well and we are doing much better than the rest of the world. Given the current global situation, we may miss out on an excellent opportunity.