Impact of budget 2010 on capital market

Impact of budget 2010 on Capital

Market

Presented byPooja shukla

Abhishek jangid

Amit gampawar

Saurav sharma

Aditya gupta

Roopam singh

Navneet sharma

What’s in store for this year?

Double Digit growth path.

Harness economic growth to consolidate the recent

gains in making development more inclusive.

Address the weaknesses in government systems,

structures and institutions at different levels of

governance.

RBI to give additional banking licenses to private

sector players. NBFC’s could also be considered, if

they meet the RBI’s eligibility criteria.

Contd.

Rs.16,500 crores provided to ensure that the Public

Sector Banks are able to attain a minimum 8% Tier-I

capital by March 31, 2011.

Government to provide further capital to strengthen

the RRBs.

Extension of existing interest subvention of 2 per cent

for one more year for exports covering

handicrafts, carpets, handlooms and small and

medium enterprises.

Impact on your wallet……

If you are in stock market then definitely

you will be keen to know how the much

awaited 2010 budget will impact on your

stock holdings. After doing detailed

analysis through different mediums we

have tried to answer your questions in

much appropriate and easy way. Below is

the sector wise analysis post budget

Trend in Stock Market- Respect

to budget

Indian Markets have seen a sharp rally from

the budget period of Feb.2009 to the present

Feb. 2010. The SENSEX in the month of Feb.

2009 closed at 8891 and the NIFTY at

2763.65.

Comparing the present value of Sensex

around 16200 and Nifty around 4900 both the

indices have gained nearly 82.20% & 77.30%

respectively.

The Indian markets have seen a big round of

recovery on account of the stimulus packages

being announced by our government and

other measures being taken last year to help

the economy recover.

Contd.

The Indian economy is in a better condition now and

the Government may now plan out on how will it If you

read the fiscal deficit numbers that have rollback the

stimulus package. come out for the year, we are

running at fiscal deficit of close to 11%.

What is Fiscal deficit ?

The difference between total revenue and total

expenditure of the government is termed as

fiscal deficit.

It is an indication of the total borrowings

needed by the government.

A deficit is usually financed through borrowing

from either the central bank of the country or

raising money from capital markets by issuing

different instruments like treasury bills and

bonds.

BUDGET MANIA 2010

Budget 2010 & Capital Market

Lower fiscal deficit in the financial year

ahead, resulting in a lower government

borrowing, soothed the stock market’s

nerves.

Stock markets gave a rousing welcome to

the Budget and rose immediately as the

FM presented his speech.

2 % hike in excise duty for sectors like

cement, capital goods and autos.

Impact on various sectors

Automobile sector

It is not that much impacted, this sector has

shown solid signs of recovery thanks to

stimulus package which is intact thereby no

negative comings in this sector.

The industry is expected to grow 12-13% in

2010-11 in value terms, led by commercial

vehicle and passenger car sales.

Commercial vehicle volumes are estimated

to rise 15-17% in 2010-11 due to sustained

economic growth. Exports will grow 13-

14%.

Automobile sector

Stocks Before

Budget

After budget % change

TATA Motors 715.55 739.05 +3.28

MARUTI 1310 1336 +1.98

BAJAJ AUTO 1698 1907 +12.31

HERO HONDA 1690 1701 +0.65

ASHOK LEYLAND 50.25 46.50 -7.46

TVS MOTORS 69.05 63.10 -8.62

Banking and Finance sector

It is also having some positive impact.

The government has proposed a Rs 16,500-crore Tier-I capital infusion in 2010-11, whichis significantly higher than Rs 1,200 croreprovided in 2009-10.

This will further meet credit demands whichare expected to increase owing to economyrecovery and increase in exports.

Banks could hike deposit rates in to meetcredit demand, leading to a 20% growth indeposits.

Contd.

Appropriate Banking facilities to be

provided to habitations having population

in excess of 2000 by March, 2012.

Insurance and other services to be

provided using the Business

Correspondent model. By this

arrangement, it is proposed to cover

60,000 habitations.

Augmentation of Rs.100 crore each for the

Financial Inclusion Fund (FIF) and the

Financial Inclusion Technology

Fund, which shall be contributed by

Government of India, RBI and NABARD.

FINANCE SECTOR

STOCKS BEFORE

BUDGET

AFTER BUDGET % CHANGE

RELIANCE

CAPITAL

761 735.65 -3.33

HDFC 1654 1700 +2.78

KOTAK FINANCE 750.70 714 -4.89

INDIABULL

FINANCE

107 100 -6.54

BANK SECTOR

STOCKS BEFORE

BUDGET

AFTER BUDGET % CHANGE

SBI 1952.65 1911.60 -2.10

BANK OF INDIA 335.45 323.70 -3.50

ICICI 832 845.35 +1.60

AXIS BANK 1067 1104.60 +3.52

Cement sector

As long as infrastructure activities goes

on increasing cement sector will boom.

In order to meet demands companies

have increased manufacturing capacity

thereby lowering operating cost.

However 2% hike in excise duty will have

an negative impact. So overall you can

say positive effect.

CEMENT SECTOR

STOCKS BEFORE

BUDGET

AFTER BUDGET % CHANGE

ACC 912.80 906.80 -0.66

AMBUJA

CEMENT

109.35 105.40 -3.61

ULTRATECH

CEMENT

998.65 1033.85 +3.52

INDIAN CEMENT 124.20 116.60 -6.11

Agriculture Sector

Rs. 400 crores provided to extend the

Green Revolution

Rs. 300 crores provided to organize 60,000

“pulses and oil seed villages” in rain-fed

areas

Rs. 200 crores provided for sustaining the

gains already made in the green revolution

areas through conservation farming

FCI to hire godowns from private parties for

a guaranteed period of 7 years

Agriculture credit flow through banks to be

set at a target of Rs.3,75,000 Crores

Contd.

For farmers loans upto 3 lakh at 7% p.a.

Agriculture sector has grown by 2.4%.

Record rice production at 98.04 million

tonnes.

14 national agricultural projects approved.

Central assistance for storm water

drainage project increase to Rs.500 crore

from 200 crore.

Rajeev Gandhi Krishi vikas yojana

allocation up by 30%.

AGRICULTURE SECTOR

STOCKS BEFORE

BUDGET

AFTER BUDGET % CHANGE

Jain irrigation 774.60 854.25 +10.28

National agro

industries

21.25 20.70 -2.59

Rallis 1139.85 1314.70 +15.34

Infra-structure

Huge investments have been projected

for coming years.

Additional deduction available for

investment in long-term infrastructure

bonds for individuals will improve fund

availability. Additionally, concession on

import duty for monorail projects would

reduce capital cost for players.

So all positives for infrastructure

sector.

Contd.

Rs 1,73,552 crore provided for

infrastructure development which accounts

for over 46% of the total plan allocation.

Allocation for road transport increased by

over 13% from Rs. 17,520 to 19,834

crores.

Rs 16,752 crore provided for

Railways, which is about Rs.950 crore

more than last year.

INFRA STRUCTURE

STOCKS BEFORE

BUDGET

AFTER BUDGET % CHANGE

DLF 303.75 288.85 -4.91

UNITECH 74.55 69.15 -7.24

INDIABULLS

REAL ESTATE

175.05 161.20 -7.91

HDIL 315.25 291.15 -7.64

PARSWANTATH

DEVELOPERS

118.20 115.80 -2.03

Consumer sectors

Demand for colour TVs, refrigerators,

washing machines ,LCDs etc is ever

increasing. Increase in tax saving slab will

decrease tax paying liabilities thereby

further boosting up disposable income and

ultimately consumer sector.

All positives for this sector too.

CONSUMER SECTOR

STOCK BEFORE

BUDGET

AFTER

BUDGET

% CHANGE

Dr. REDDYS LAB 1103.80 1141.95 +3.46

SUN PHARMA 1547.80 1571.95 +1.56

RANBAXY 441.60 454.05 +2.82

CIPLA 322.35 312.65 -3

GLENMARK 256.30 260.05 +1.46

FORTIS

HEALTHCARE

151.55 156.30 +3.17

Power sector

The budgetary allocation for the sector,

excluding Rajiv Gandhi Grameen

Vidyutikaran Yojana (RGGVY), has been

raised to Rs 5,130 crore from Rs 2,230

crore.

A clean energy cess of Rs 50 per tonne will

be levied on domestic and imported coal.

There will be a marginal pressure, though,

on companies which sell power in the open

market.

Solar, small hydro and micro power projects

at a cost of about Rs.500 crore to be set up

in Ladakh region of Jammu and Kashmir.

POWER SECTOR

STOCK BEFORE

BUDGET

AFTER BUDGET % CHANGE

RELIANCE

POWER

142.40 138.90 -2.46

SUZLON 73.35 69.50 -5.25

TATA POWER 1242.65 1258.90 +1.30

NTPC 202.73 204.35 +0.80

BHEL 2378.70 2376.55 -0.09

SIEMENS 643.75 669.15 +3.95

Steel Industry

The most promising sector has shown

faster than expected recovery from

economic downturn. Increase in

infrastructure and automobiles has

increase its demand and supply scenario.

Profitability of steel companies is

expected to continue in coming years. So

lot of positives for steel sector.

STEEL SECTOR

STOCKS BEFORE

BUDGET

AFTER BUDGET % CHANGE

TATA STEEL 549.85 576.40 +4.83

SESA GOA 378.95 372.10 -1.81

JINDAL STEEL 633.60 617.25 -2.58

SAIL 206.63 209.50 +1.38

GUJARAT NRE

COKE

72.45 76.65 +5.80

Telecom sector

Subscriber base expected to increase

but continuous fall in profits due to

lowering tariff plans and increase in

minimum alternate tax to 18% from 15%

will negatively impact the profitability of

telecom service providers.

So negative impact on this sector.

TELECOM SECTOR

STOCK BEFORE

BUDGET

AFTER BUDGET % CHANGE

RELIANCE

COMMUNICATIO

N

170.50 160.55 -5.84

BHARTI- AIRTEL 314.40 281.10 -10.59

IDEA CELLULAR 58.85 59 +0.25

TATA

COMMUNICATIO

N

301.05 298.75 -0.76

Oil and Gas sector

Subsidy on petroleum products will be

disbursed as cash to oil marketing

companies (OMCs).

Increase in customs duty across crude oil

and petroleum products would translate in

higher duty protection for refiners.

The resultant increase in refinery gate

prices for retail auto and cooking fuels, if

absorbed by OMCs, would translate in a

rise of almost Rs 11,000-14,000 crore in

under-recoveries in 2010-11.

Contd.

Bio-diesel custom duty lowered.

To develop and set up national gas grid.

Tax incentives will be provided on capital

expenditure on the laying and operating

of cross country natural gas, crude or in

pipe line networks for excise duty on

naphtha reduced to 14%.

OIL SECTOR

STOCKS BEFORE

BUDGET

AFTER BUDGET % CHANGE

ONGC 1102.10 1105.90 +0.34

BPCL 556.90 592.65 +6.41

HPCL 338.95 362.55 +6.96

INDIAN OIL

CORP.

309 326.55 +5.68

Textile sectors

The extension of 2% interest subvention on

pre- and post-shipment export credit till March

31, 2011, will help small exporters reduce

interest costs.

The hike in excise duty on man-made fibres

and yarns will increase polyester prices by Rs

1.50 to Rs 2 a kg, but the manufacturers will

be able to pass the hike, as polyester

continues to be cheaper than cotton.

The government announced a one-time grant

of Rs 200 crore to Tamil Nadu for the

installation of a zero-discharge system to

reduce environmental pollution at the Tirupur

cluster. This will help knitwear exporters in the

TEXTILE SECTOR

STOCK BEFORE

BUDGET

AFTER BUDGET % CHANGE

ALOK IND. 26.15 23.70 -9.37

RAYMONDS 212.70 227.90 +7.15

WELSPUN

INDIA.

77.10 78.90 +2.33

BOMBAY

RAYON.

212.05 204.40 -3.61

Precious Metal

On gold and platinum from Rs.200 per 10

grams to Rs.300 per 10 grams .

On silver from Rs.1,000 per kg to Rs.1,500

per kg .

Basic customs on Rhodium - a precious

metal used for polishing Jewellery reduced

to 2 per cent .

The excise duty on refined gold made from

such ore or concentrate reduced from 8%

to a specific duty of Rs.280 per 10 grams.

PRECIOUS METAL

STOCKS BEFORE

BUDGET

AFTER BUDGET % CHANGE

Hindustan zinc 1073.10 1087.80 +1.37

National

aluminum

379.80 375.30 -1.84

Hindalco

industries ltd

140.75 155 +10.12

Defence Sector

Allocation for Defence increased to Rs.

1,47,344 crore including Rs 60,000

crore for Capital expenditure.

About 2,000 youth to be recruited as

constables in five Central Para Military

Forces from Jammu and

Kashmir in the year 2010.

DEFENCE SECTOR

STOCKS BEFORE

BUDJET

AFTER BUDGET % CHANGE

BEML 1095 1115.20 +1.84

L & T 1447.85 1487.20 +2.72

Zen technology 216.60 210.90 -2.63

Rural sector

Rs. 66,100 crore provided for Rural

Development.

Allocation for Mahatma Gandhi National

Rural Employment Guarantee Scheme

stepped up to Rs.40,100 crore in 2010-11.

Unit cost under Indira Awas Yojana

increased Rs.45,000 in the plain areas and

to Rs.48,500 in the hilly areas.

Contd.

Allocation to Backward Region Grant

Fund enhanced by 26 per cent from

Rs.5,800 crore in 2009-10 to Rs 7,300

crore in 2010-11.

Additional central assistance of Rs 1,200

crore provided for drought mitigation in

the Bundelkhand region.

An amount of Rs.48,000 crore allocated

for rural infrastructure programmes under

Bharat Nirman.

RURAL SECTOR

STOCKS BEFORE

BUDGET

AFTER BUDGET % CHANGE

Nestle India 2747.15 2642.25 -3.81

Britannia

Industries

1639 1632.10 -0.42

ITC 250.85 248.40 -0.98

Marico 99.80 100 +0.20

Medical Sector

Uniform, concessional basic duty of 5 per

cent, CVD of 4 per cent with full

exemption from special additional duty

prescribed on all medical equipments.

Full exemption currently available to

medical equipment and devices such as

assistive devices, rehabilitation aids etc.

Specified inputs for the manufacture of

orthopedic implants exempted from import

duty.

MEDICAL SECTOR

STOCKS BEFORE

BUDGET

AFTER BUDGET % CHANGE

Dishman Pharma 207.75 203.50 -2.05

GlaxoSmithKline

Pharmaceuticals

1576.85 1681.75 +6.65

Pfizer Ltd. 924.35 935 +1.14

IT Sector

There have been no specific

announcements made which should affect

the IT sector directly but the UIDAI (Unique

ID Authority of India) project has been

approved and Rs. 1900 crores have been

allocated to it. The project will most likely be

handled by Indian IT companies so this

should be good.

Also, Rs. 31000 crores have been

earmarked for school education reforms in

2010-2011; which will probably be a boost

for the IT sector in the long term.

IT SECTOR

STOCKS BEFORE

BUDGET

AFTER BUDGET % CHANGE

KPIT Cummins

Infosystem

113.60 110.45 -2.77

Infosys 2497.50 2577.05 +3.19

Polaris software 160.20 155.15 -3.15

Wipro 659.75 671.05 +1.71

Conclusion

Increased borrowing from the government will make the

corporate difficult to borrow.

As government increased expenditure in infrastructure,

defence and other expenditure this will have indirect

positive impact on the industries.

Government push for rural development is going to see a

new growth area opening up for the FMCG companies as

their disposal income will increase .

Companies working in the rural sector will definitely will be

the prime beneficiary in the coming years.