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Friday, Mar 01, 2002

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Budget: More stress on economy

THE 2002-03 Budget may have placed more stress on the corporate sector and may as such not be a positive factor in determining stock price trends. Stocks could edge up still, but that may have little to do with the measures in the Budget. As the third Budget in a row that has taken in a sizeable sum of money from savers and India Inc, it could have an adverse bearing on demand growth and profitability.

There are not too many sectors from a market perspective that have had positive measures. It may also not be fair to expect such measures year after year from the Budget. However, what could stifle the corporate sector is the mop-up of resources through various forms.

From a sectoral perspective, housing finance companies such as HDFC and LIC Housing Finance, efficient banks such as HDFC Bank, Corporation Bank as well as SBI for its sheer size and FMCG companies such as Hindustan Lever, Colgate Palmolive among others seem to have had a favourable run of measures in the Budget. Shipping companies have had a positive move on tax shelter, but market interest in these stocks is limited.

The cut in the peak customs rate from 35 per cent to 30 per cent may affect the fortunes of commodity-oriented companies at a time when global price trends are also weak. The steel sector package may be of limited relevance as Tata Steel is only steel stock worth a look. The non-ferrous metals sector also appears to have had a rough run. The pharmaceutical stocks may be driven more by company-specific factors than by measures of the Budget.

One sector where some spurt may be in the offing is in the privatisation programme. Driven by the recent successes an ambitious programme has been lined up. If the strategic sale mode is pursued vigorously, stocks such as BPCL, HPCL, Hindustan Zinc, IPCL, Neyveli Lignite among others may merit a close watch.

S. Vaidya Nathan
BL Research Bureau

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Budget: More stress on economy


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