The Indian equity markets represented by S&P CNX Nifty & SENSEX posted negative 1.66% & negative 1.96% returns respectively in the month of March 2012, breaking its upward trend for the year due to a lacklustre budget and concerns over the General Anti Avoidance Rule (GAAR) introduced in the budget. The global indices posted mixed returns. In line with the benchmark index, most sectoral indices declined in March. Interest rate sensitive sector realty declined the highest by 9.1%, as RBI stayed away from rate cuts.
While FII inflows were healthy in the first half, they slowed down in the second half of the month as the government introduced the GAAR, which could bring uncertainties to FIIs on the taxation front. The net FII inflows stood at Rs 652 bn. Crude continued to be at the high levels of US$ 123-125 per barrel. Rupee depreciated by ~3.8% v/s the US dollar.
After falling for five consecutive months, WPI-based inflation rose to 7% in February 2012, from 6.6% in January driven mainly by higher inflation in primary food articles. On March 9, 2012, the RBI announced a 75 bps cut in the CRR, bringing it to 4.75 per cent, in order to alleviate the tight liquidity conditions. The Union Budget FY 2012-13 announced on 16th March was neither populist nor reformist and adopted a safe middle path. It raised the indirect tax rates and gave marginal relief to individual tax payers. It took small steps towards fiscal consolidation. There were no major policy announcements that could be a pointer to the reforms expectation in the coming year.
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