The man who see tomorrow...
Friday, February 26, 2010
End of the day…
Budget is as per my expectations. As stated by my CMD in a separate report on Budget as early as 12.30 pm in the noon this Budget has dealt with the major concerns of the market. The Hon'ble FM succeeded in containing the market borrowing to as low as Rs 345000 crs which was well below analyst's expectation of Rs 475000 crs. It was really surprising to see I T limits rising substantially even when the GOVT was having major constraints of revenues. It did forgo Rs 26000 crs from tax which had really speaking shown 4% minus growth in I T. But to me this will work magic as this will spur the growth from the core. This is what is called the inclusive growth. VI th Pay Commission and farmer debt waiver had already created a support system and made our auto as one of the top sector in the world. Now these I T limits would push the auto sector again which I used to believe will top out soon. Therefore the Hobson's choice for investment should be auto ancillary. Rise of over 8% expenditure on already higher base of over Rs 1000000 crs is really commendable and exhibiting that India is becoming an Asian tiger.
Then comes the Rs 173000 crs and Rs 66000 crs spending package on infra. Well, 12% of the spending generally goes to cement and 14% to steel and hence these 2 sectors will become darling of the market. Again here ACC, India Cement, Grasim, Tisco, JSW, Ispat qualify for investment as the business outlook improves. This is just adding fuel to fire. In fact, RNT is dreaming to have at least 2 more acquisitions in Tisco in next 2 years which means Tisco has to see new heights.
Then come the NBFC companies. Kolkata really got lottery thanks to PRANABDA. Most of the private NBFC companies are there in the hands of Kolkata guys and the premium has shoot up by 100 % just after budget. No fresh licenses are being issued by RBI and NBFC can now get a banking license. The dream of ADAG will go through soon and the plan of merging IFCI into bank may see the light of the day.
The nos of tax collection suggest that even this year there is head room to exceed the targets especially in I T and excise due to rollback. The disinvestment figures are taken at Rs 40000 crs which is again aggressive and most probably meet the target.
There is no doubt in my mind that the budget is pro growth though it has left with some concerns and gaps which will have to be dealt with some time later either by the FM or the RBI as the case may be.
Since the FM has not dealt with fiscal consolidation market will expect rise of inflation and consequential rise in rate, repo rate and CRR in some time.
There is one provision of treating the uncompleted constriction as service to the buyers could make housing property costlier by 10% which could have dampening effect on housing realty stocks. At the same time this could be good news for re sellers as the prices will rise equally and the same will be out of service tax ambit. The Hon'ble F M need to re consider this being very harsh provision which could put breaks on fast recovering sector.
Apart from the same there GIFT tax on unlisted shares if transacted below the FMV which could be book value. This is a good provision as all arms length transactions will come under tax preview.
MAT increase by 3% is really bad as the loss making companies will have to shell out more taxes whereas reduction in surcharge by 2.5% is good for all companies.
In short the Budget is pro growth and market will welcome this though there may some market players which always search for negative like in all cases few brokers and set 3800 Nifty target.
Very soon we will forget budget and start talking about global worries once again as market require something to talk about and blame it on. Bears never die……
BigGains !!
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