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Wednesday, Mar 01, 2006


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Budget recedes in importance

This may not have been a `big bang' or a `dream' budget that sent the markets into yet another bout of bullish action. This is perhaps the first in a series of budgets over the next few years that will highlight the declining importance of this event in determining market action. It may at best have a short-term impact because of the sentiment factor.

We are well on our way to ensuring that the budget has a status akin to the credit policy of the past two years. It sets the broad direction, but the scope for specific fiscal measures that propel stock prices one way or the other is increasingly getting limited. Even in this budget they were few and far in between. This trend is good for investors and the markets. The increase in Securities Transaction Tax may be a minor blip, while there may be disappointment in the short term for traders.

It's Maruti's day

The reduction in excise on small cars by eight percentage points and a liberal definition of small cars is likely to benefit Maruti and, to a lesser extent, Tata Motors. In anticipation of the excise duty reduction, the Maruti stock has been on an upward march in recent weeks. This buoyant trend is likely to continue, as there could be a boost to earnings from robust volume growth. Auto-component players linked to Maruti and Tata Motors such as MICO, Subros, Jay Bharat Maruti, Sona Koyo and Asahi India may benefit over the longer term.

Consumer products pack a punch

The thrust on irrigation, rural infrastructure and targeted farm credit could have a cascading impact on FMCG sales, where accelerated rural growth has been visible over the past two quarters. The reduction in customs duty on a range of soap, detergent and personal product inputs will provide relief from rising material costs for FMCG companies such as Hindustan Lever, Godrej Consumer and Colgate Palmolive.

Lower duty incidence on packaging materials will provide a thrust to categories that use low unit packs and sachets to drive volumes such as shampoos, detergents and toothpaste. Reduction in excise duty on food products such as pasta, ready-to-eat foods and mixes could expand profitability or, alternatively, allow lower selling prices for food products. Players such as ITC could benefit from market expansion.

Infrastructure gets a push

That there would be a push for rural development, power and infrastructure was widely expected. This has been the trend over the past couple of years and this budget is no different. These are three sectors where government-spending patterns still matter. Stocks of companies in the engineering and construction space, which will be the prime beneficiaries, have been on an upward for several months now.

What the budget has done is confirm the likelihood of high revenue visibility for stocks from these two sectors. Not surprisingly, the likes of Siemens, ABB and Larsen & Toubro have been firm. Likely revenue and earnings visibility have been largely priced in and we can expect such price trends in these stocks to shed the budget-day effect and move on fundamentals sooner than later.

There is value addition for petrochem

As the government rationalises the import structure by reducing peak tariff rates, there is greater scope for value addition in the petrochemicals sector. The likes of Reliance and IPCL are likely to benefit.

S. Vaidya Nathan

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Stories in this Section
Rice processing

The lure of equity despite stretched valuation — Bias in favour of investments in MFs, insurance
No cheer for telecom users, service providers — Now, service tax on Net telephony
Domestic airlines get tax exemption for 1 more year
A new lease
Budget goes pro-investment; new taxes kept to minimum — FBT modified; small cars to cost less on duty cut; tobacco taxed
Boost to investment activity — Govt totally committed to fiscal prudence and continued reforms: Chidambaram
Central Plan outlay put at Rs 2,54,041 cr — Energy, social services & transport corner major chunk
Pay for more services
Metals: Reflected lustre
Big bonanza for the small car
A touch more than a stitch in time
Wiring up the nation
A few goodies for rural impetus, lower costs
Ramp up in resources for welfare
Tea industry hails allocation
Fiscal improvement
Let us make our destiny
Sighs of relief and dropped jaws — The FM seems content more at not ruffling many feathers
A shopper's day out
Small cars, ice-creams, colas cheaper; not so umbrellas, glassware

Taxes not recovered crossed Rs 1,11,000 cr
25 projects under e-gov plan
Services sector provides Rs 23,000 cr
Refractories: Marginally positive
No major reaction
Gathering pace
Judicious tinkering
Equity fund redefined
No special drive: auto parts sector
`There's further scope for reducing raw material duties to Asean levels'

Duty rationalisation for man-made textiles — More allocation for textile schemes; Rs 189 cr for textile parks
Excise duty cut, a boon for small carmakers — `Small cars' are Maruti 800, Wagon R, Zen, Alto, Hyundai Santro, Indica diesel
MFs keen to tap global opportunity
IT industry divided over impact of excise duty — Desktop, notebooks may turn costlier
Some habits don't die that easily
AMFI to seek clarifications on foreign investments
Towards a cutting edge tax system
Redeeming `Aam Aadmi'
Boost for Bharat Nirman
Charting a high-growth path
Calls everywhere, but search for energy
Succour for the old
Pinches more than it soothes
Accent on digitisation — The income-tax offices will undergo business process re-engineering
How the tax breaks pan out
Price cuts galore on small cars
Excise duty: Minor twists
Registrars, share transfer agents under service tax ambit — `12% levy is bad news for AMCs'
Tepid changes to corporate tax
Budget recedes in importance
The knowledge society
Investment boom
Let down on CST
The wind is blowing, take cover!
Thin attendance, minimal interruptions — Top CEOs at industry chambers largely non-committal
Corporates neutral to Budget proposals — It was on expected lines, say honchos
Offers in manufacturing, services
Boost for soya
MAT rates altered
Captains tuned in
`Fiscal deficit to come down'
`Good Budget for industry'
Stable tax structure welcomed
It'll promote export growth
Focus on rural sector
It gets 8 marks out of 10
Petroleum industry unhappy
Boost for auto sector
Duty cuts for plastics, hydrocarbons
Zero customs duty on set-top boxes to benefit manufacturers
Customs duty hike — Vanaspati industry disappointed
Wiring up India with highway networks
On the expressway
Higher allotment for highways
No relief for oil cos on pricing, duty structure
Pharma sector sulks as Budget ignores wish-list
A no-show for the pharma sector
`Not much for pharma sector'
Bleak outlook for pharma sector
More coal blocks for power sector
Budget disappoints shipping industry
Shipping management services expensive
Marginal duty cut for alloys, metals — Proposal to cut duty on mineral products to 5 per cent
Sugar sector feels let down — `No measures on de-control'
15 new services under tax net — Scope expanded in banking, financial services
If only consumers had lobbyists
Hails nod for tea protection fund
Tea industry hails allocation
Wah! Budget
`A boost to replantation'
`Will help exports'
Policy overhaul for coal sector
`No relief for domestic liquor players'
A mild choker
Additional excise irks cigarette cos
Tobacco shrugs off excise hike
FMCG prices to stay put
No reason to blush
Your small car will now be less expensive
Toyota not to hasten small car launch
Positive spin to auto ancillary
A ray of hope
Will colas be cheaper?
Priority in lending to food sector — Rs 1,000-cr corpus for refinancing loans
Priority sector status hailed
`Greater credit flow likely'
Of pasta, idli and dosa
`Expert panel to help gems sector'
`Viability gap funding' for semiconductor projects — New policy on cards to make India hub
`8% excise on packaged software not good'
`Hike in service tax a dampener'
A good fit for consumer
5 pc hike likely in landed cost
A fine cut for paper
Paper sector happy with excise cut
`Impetus for growth'
Constraint on raw material sourcing
Excise duty cut for paper products
`Likely to see flight of IP to tax-friendly nations'
Ice-creams cheaper? Maybe not all
Jute industry upset
Govt may dilute stake in non-navratnas
Going the extra mile for the farmer
Service tax, no hiccups for Concor
Service tax hike not to have inflationary impact
Bank deposits to get 80C deduction — Recapitalisation bonds to be converted into tradable securities
No bad news on income taxes
Tweaking the FBT
Fringe Benefit Tax provisions modified — India Inc not mollified, wants it to go completely
Outlay for tourism hiked
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