Interim Budgets and the business sentiments

The interim budget failed to uplift the business sentiments and positivity in the market, particularly the IT industry and banking sector IT Industry:IT industry had big expectations with Interim budget. Prior to the budget presentation the IT industry was pointing at the need for extensions of Software Technology Parks of India (STPI), Export Oriented Units(EOU) schemes, Employee Stock Ownership Plans (ESOPs) and some more Standard Operating Procedures (SOPs) with tax benefits

Banking Sector:The Government did not give any benefits to the banking sector in this year’s interim budget rather the Government indicated that the cost of borrowing might go up.

Impact on Indian stock market: Indian stock market opened on a weak note and dipped further as the Interim budget was not able to meet expectations. Bank stocks were among the worst performers on the Bombay Stock Exchange. Banking index opened weak and saw further downtrend to about 4-5%. The market closed with:

Sensex: 9305.45 (down -329.29 points)

Nifty: 2848.50 ( down -99.85 points)

Satyam Accounting Scandal a big blot on Indian IT industry--

An accounting fraud was the last thing investors in India would have imagined as a trigger for a reversal in investor sentiment. The Satyam accounting fiasco has come at a time when the sentiment is already brittle and is likely to affect the image of Indian companies among foreign portfolio investors. The accounting scandal that caused Satyam Computer Services Ltd. to collapse is shaking investor confidence in Indian stocks, putting an end to the market’s best start since 2000. This unfortunate development will be a short-term negative for market sentiment. The country's fourth largest IT company - after TCS, Infosys and Wipro - was for several years cooking its books by inflating revenues and profits, thus boosting its cash and bank balances; showing interest income where none existed; understating liability; and overstating debtors' position.

India’s Sensex index tumbled 7.3 percent (on Wednesday), led by a 78 percent plunge in Satyam. Satyam American depositary receipts fell $8.42, or 90 percent, to 93 cents before the opening of the New York Stock Exchange, which then halted trading in the stock.

The Satyam scandal is spurring concern that India’s corporate governance is inadequate days before the earnings reporting season starts. What is SEBI for if it can't monitor business entities? Worries of thousands of employees and investors who have been left in crisis needs to be redressed immediately. The resignation of Satyam chairman Ramalinga Raju after confessing to have forged and inflated the company's accounts for years has sparked fears among the Indian IT firms. This is shocking, painful and a good warning for other companies in the sector.

India -- 48th in global IT competitive index !!

India ranked 48th in the world in the 2008 IT industry competitiveness index, a study said. 

The key attributes of a country in analysing its environment for the IT sector was ample supply of skills, innovation,advancement in technology and infrastructure, protection and enforcement of IPRS, open comeptitive economy and government support.

ET report..."India has an overall score of 28.9 on the IT competitive index as per the study conducted by the Economist Intelligence Unin its second year, assesses and compares the IT industry environments of 66 countries to determine the extent to which they enable IT sector competitiveness. "

The study revealed that India performed best in business environment and support for IT industry development with a score of 59.3 per cent and 54 per cent. Areas of improvement include IT infrastructure and R and D environment in the country which are relatively low in the IT industry competitive index.

India has a long way to go but will definitely achieve a better rank in coming 5-7 years..!!