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• The market has been on the back foot as it was anticipating a dull FY 12-13 Budget that was presented by Finance Minister Pranab Mukherjee last Friday. Hence, the passive behaviour of participants was no surprise, making the Budget a no-show for many.

• For Jyotivardhan Jaipuria, head of research at BoFA Merrill Lynch, Budgets announced by the government in the last couple of years have been non-events but credits Mukherjee of presenting a realistic one this year as far as fiscal deficit projection is concerned. Lack of reforms announcement is not a key concern for Jaipuria, who sees them happening outside the purview of the Budget. He terms last year's Budget as one that went completely off-track, with commodity prices being the biggest evil.

• Wrath of commodity prices continues this fiscal as well. On Sunday, the finance minister indicated a possible petrol price increase once the Budget session gets over. Prices of petroleum products such as diesel, kerosene and LPG in the domestic market are hugely subsidised, burden of which is borne by oil marketing companies like Indian Oil, Bharat Petroleum and Hindustan Petroleum whose cumulative revenue loss per day stands at Rs 486 crore.

• Geopolitical tensions from the Middle East and high consumption of crude from fast-growing economies like India and China have seen oil prices surging. Struggling to tackle the rising cost of crude, China today raised the prices of petrol by about 6% and diesel about 7% for the second time in 2012. Jaipuria sees FY13 as a tough year for market's to move but any relief from global commodity prices may help.According to him, markets will correct if oil rises by more than USD 10 per barrel. Once the Budget is passed, he expects oil price hikes to follow.

It's all in the Math

• Murmurs and doubts have also begun to creep in as to whether the government got its math wrong as far as the fiscal arithmetic is concerned. Mukherjee has set himself a 5.1% fiscal deficit number, a tall order feel many economists and fund houses. Given the tepid growth in the country as well as oversees, even Jaipuria believes the fiscal target will overshoot to 5.6%, assuming crude oil prices head higher.

• Right now, bond markets are spooked by the fiscal deficit estimates. BofA-ML estimates it will go to the top end of the 8-8.5% range. There is a Rs 60,000 crore increase in the gross borrowing programme of the government in the next fiscal at Rs 5.69 lakh crore. Jaipuria expects the government's borrowing to go up, which will see the yield on the benchmark 10-year bonds remain in the upper circuit at 8-8.5%.

RBI's Tight Rope Act

• There is a huge pressure on the RBI to cut rates because of the growth slowdown. It is said that the Reserve Bank 's job to cut rates would be easier than the government's to reduce borrowing but the former has the not-so-easy task of doing a balancing act between growth and inflation. The apex bank's actions have been getting difficult to predict recently. Its earlier CRR cut in February stumped analysts after it suggested all along that such a move would be premature.

• While the Budget hiked service tax and excise duty to 12% respectively, Jaipuria feels this could further add pressure to the inflation number. He sees the RBI's job getting tougher ahead.Experts like him, however, are envisaging that the RBI will finally begin the rate cut cycle in the April policy. "As long as growth is not high, the RBI's whole imperative should be on how to kick start growth again."The street is factoring in 100-125 basis points cut for the current fiscal. Jaipuria is also in that range of 100-150 basis points but he says, "It all comes down to how global commodities like crude oil play out."

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