Yesterday Indian Markets tumbled as FM unveiled the widest budget deficit in 16 years and failed to lay out firm plans to sell state?run assets and ease foreign investment rules.

Investor expectations for the budget were high after the PM won a resounding re?election in May, reducing his dependence on allies such as the communist parties who opposed asset sales and looser foreign investment policies during his first term.

FM allocated 391 billion rupees for a rural jobs program which benefited 45 million households last year. The amount earmarked is 144 % more than the previous year. “The budget is a fiscal document and we think the short? term policy objective of stimulating demand will likely be achieved,” said Tushar Poddar, a Mumbai?based economist at Goldman Sachs Group Inc.

While Standard & Poor’s said the fiscal deficit was “within the boundary” of their expectation, Fitch Ratings said the budget doesn’t “alleviate” pressure on India’s ratings.

S&P ranks India’s long?term local?currency rating at BBB?, their lowest investment grade. Fitch has a BBB? long?term rating on India, also their lowest investment?grade level.

India’s Bombay Stock Exchange Sensitive Index had its April 2010 target raised to 18,000 from 15,000 at Macquarie Group Ltd., which said markets “overreacted” yesterday, when the gauge slumped 5.8 %.

In U.S. yesterday stocks rose, erasing an early slump, as speculation that global credit conditions are improving overshadowed a drop in  commodity producers. Treasuries climbed, while the yen and dollar gained against the euro. U.S. service industries from retailers to homebuilders shrank last month at the slowest pace in nine months, as measures of new orders and employment increased.

The Institute for Supply Management’s index of non? manufacturing businesses, which make up almost 90 % of the economy, rose more than forecast to 47 from 44 in May China’s economic growth may have accelerated to as much as 7.5 %  in the second quarter on surging fixed?asset investment and loans, said Zhang Jianhua, head of the central bank’s research bureau. China’s economy may expand 8 % in the third quarter and 9 % in the final three months of the year. Gross domestic product rose 6.1 % in the first quarter from a year earlier.

Crude oil fell to a five?week low on growing concern that the global  economic recovery will falter, curbing fuel consumption. Oil dropped for a fourth straight session, the longest slide since February.