Our honorable members of parliament were apparently in the same quandary. Having found no issue on which to disrupt the budget speech, the ever resourceful Laloo Prasad Yadav, jumped up to demand that the speaker switch to a more swadeshi Hindi. The shouting brigade apparently saw no irony in the fact that all of them are most willing to install or supporta foreigner as prime minister. Coming back to the budget, it has plenty of specific proposals to revive the market and it has its share of grey areas where the minister has resorted to mere lip service. The reduction in long term capital gains tax and the tax sops for Unit Trust of India (UTI) are positive for the market. By announcing tax sops for open ended schemes where over 50 per cent of the investment is in equity, the finance minister has ensured that UTI is the main beneficiary, but other mutual funds cannot complain either. Since the government has already announced its resolve to support UTI, the tax incentives should see increased investment in units, which will translate into fresh equity investment and boost the market.

Does this mean that UTI will no longer stick to its stated plan of bringing US-64's equity down to 40 per cent over the medium term? Wouldn't this mean giving up the tax incentives? At the time of writing this column, UTI Chairman P.S.Subramaniam had (on television)stated that he had the Deepak Parekh committee report but was clueless about the specific restructuring proposals ordered by the government. The one reform that one would like to see with respect to UTI as well as all mutual funds is an increase in the fiduciary responsibility of fund managers towards investors' funds. Unless fund managers are made accountable to investors and punished for mismanagement (with rewards for good performance), there is no guarantee that investors will invest in mutual funds because of the tax sops alone. The Consumer Education and Research Centre has for long argued that when a mutual fund which claims investment expertise, not only fails to earn returns but suffers a depreciation in capital, then the onus of proving its bonafides should shift to the fund manager. This could be based on a fair comparison with the performance of similar funds launched in a comparable time frame. Unless the mutual fund industry is subject to such quantifiable performance compulsions investorconfidence will not be sustained for too long on the basis of tax sops alone.

Similarly, one is skeptical about any `joint mechanism' of the Securities and Exchange Board of India and the Department of Company Affairs, nabbing the fly-by-night operators who vanished with investors funds. (Luckily for Mr.Sinha, since the primary market has remained dead all through his regime, there is not question of companies vanishing during the BJP regime). If several budgets in the past have been dubbed `Reliance' budgets, market analysts are calling this oe the Deepak Parekh budget. Apart from the Parekh committee's proposals doing their bit for the capital market, the housing sector and housing finance companies specifically have been major beneficiaries. The market has quickly revised its view on Housing Development Finane Corporations' (HDFC) prospects and the scrip had quickly touched the upper circuit filter. The housing sops are expected to release some badly needed cash for builders stuck with unsoldapartments and partly constructed buildings. The scrapping of stamp duty on debt instruments traded in the dematerialised mode is a big breakthrough which the market has yet to grasp. C.B.Bhave, Managing Director of the National Share Depository Ltd. points out that the announcement should give a big fillip to the debt market where stamp duty has either been a grey area or a handicap, depending on the attitude of the traders. By scrapping stamp duty (which is a concurrent list subject), says Mr.Bhave, the finance minister has taken the decision out of the hands of state governments removing the biggest impediment to the development of a vibrant secondary market which reaches out to retail investors.

Traditionally, the Indian debt market has been very disorganised. It is largely a telephone market; narrow and illiquid without even a standard market lot. This along with the confusion about stamp duty kept the retail investor out. It is now up to debt issuers and market intermediaries to work atexpanding the market. Finally the biggest disappointment has been with regard to public sector disinvestment. In a post budget interview, the finance ministry bristled at a description of the present divestment through `cross holdings' as phony . But even a simple straw poll would reveal to him that nobody believes that the government is more serious about divestment this year. The minister has announced his intention to raise Rs 10,000 crores from divestment this year, he has also improved his budget rhetoric.

Last year, he did not so much mention the Disinvestment Commission (DC) by name. This year, he spoke at length about the DC's suggestions to raise funds through strategic sales, its demand for restructuring PSUs and the benefits in the form of reduced government spending on PSUs. He also promised to refer more companies to the DC for its valued opinion (if the Disinvestment Commission does not decide to quit in disgust before then) but made no mention of restoring the powers of the DC, whichwere sneakily axed by the left front government. In a nutshell, Mr.Sinha may have won over investors for the present, but unless he delivers on some of the grey areas, the market is unlikely to remain euphoric.