| What does Budget 2010 hold for D-St’s blue chips?
27 Feb 2010, 0744 hrs IST |
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| ET Bureau
The day traders may have played their game, but for millions of investors, it’s now time to sit back and read between Pranab babu’s lines. Maybe you need to take another look at your portfolio, tweak things around a bit. With service tax on rail freight, higher MAT and the partial rollback of stimulus, it will take a while to figure out whether the Budget is as friendly as it appears.
To make life a little easier, and give you an idea of what’s hot, ET, in association with ICICIdirect — an arm of ICICI Bank — gives you a sense of how the Budget will impact the fortunes of the 30 Sensex companies. We have identified the winners, the losers, and the also-rans. This, we hope, will keep you streets ahead in a world that’s full of surprises. So, read on... |
TELECOM:
| Bharti Airtel
| 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Buy
Increase in MAT from 15% to 18% would have a negative impact on the company’s earnings. However, the total impact would not be significant. The near-term auction of 3G spectrum could be the next trigger for the stock. In the long run, the company stands to benefit from the Zain acquisition. |
| Reliance Communications | 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Sell
Increase in minimum alternate tax (MAT) from 15% to 18% is likely to increase the tax burden on Reliance Communications. The company had paid tax at the rate of 14.9% of profit before tax during the December ’09 quarter. However, it may gain from the trickle down impact of the proposed boost to consumer demand. |
CEMENT:
| ACC Ltd
| 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Sell
The excise duty hike of 2% will be partially passed on to consumers. This will account for Rs 2-3/50-kg bag. However, the expected glut in the South will put pressure on pricing in CY10E. Thus, despite the 10% volume growth & rise in demand on account of infra spending, we expect the bottomline to fall 31% in CY10E. |
| Grasim Industries | 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Hold
The impact of excise duty hike would be neutral for Grasim as it would be able to easily pass on the impact to consumers. The company has high exposure to northern markets, where we expect prices to remain firm, which would help Grasim raise its sales volume after commissioning of its new 1.5 mtpa unit at Rajasthan in Feb. |
REAL ESTATE / INFRASTRUCTURE:
| DLF | 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Buy
The change in tax slab, coupled with extension of subsidy for housing loans by one more year should boost demand for residential units for DLF. Further, the street could see a possible upgrade in the DLF NAV from the anticipated recovery in the commercial market in the second half of this fiscal and the successful listing of DAL this year. |
| Reliance Infrastructure
| 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Buy
Rise in MAT along with a higher clean energy cess of Rs 50 per tonne on domestic and imported coal will be neutral on the existing power portfolio. The provision will be negative for upcoming plants as R-Infra may not be able to pass on cost hike to beneficiaries. MAT hike may hit its infrastructure operations. |
| Jaiprakash Associates
| 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Buy
The hike of 2% excise duty hike would be largely neutral, as the company would be able to pass it on to the end user. Earnings should increase sharply on account of strong growth in cement division, driven by cement capacity addition & construction division due to strong execution of Yamuna Expressway & Karcham Wangtoo project. |
BANKING/FINANCE:
| HDFC Bank | 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Buy
Higher GDP growth will lead to better credit offtake for banks, particularly for HDFC bank which is well capitalised to capture the pick-up in loan demand. The refinance window of IIFCL will enable infra financing by all banks, including HDFC Bank. Higher disposable income of individuals will enhance existing CASA base of 50%. |
| HDFC
| 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Buy
Interest subvention on housing loans up to Rs 10 lakh extended till March 2011 with an average loan to the value of 50%. This should be neutral for HDFC since its average ticket size is around Rs 16 lakh and loan to value is around 68%. Increase in disposable income for individuals should help HDFC indirectly to control asset quality. |
| ICICI Bank | 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Buy
The bank is not a direct beneficiary of any announcement. But easing concerns on fiscal deficit & government borrowings are positive. It will help keep interest rates stable, thus not negatively impacting loan growth. On the other hand, if bond yields dip further, it will help ICICI in making money on its investment book. |
| State Bank of India
| 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Buy
Lower borrowings will take off pressure on bond yields (current 7.8% levels) and hence SBI will not see any material MTM hit on treasury portfolio. Subvention of timely farm loan repayment to 2% should keep a check on agricultural NPA’s. IIFCL’s refinancing window should help boost infra credit by SBI as liquidity flow will be easier. |
CAPITAL GOODS/ FMCG / OTHERS:
| NTPC
| 
| | Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Buy
Increase of MAT rate and an additional clean energy cess imposed on domestic & imported coal will increase the cost for the company. NTPC will be able to pass the cost hike to beneficiaries. Increased focus towards the solar target of 20,000 MW will also be beneficial. Capex planned for FY11 is expected to be Rs 22,350 crore. | |
| ONGC
| 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Buy
The decision on recommendation of the Kirit Parikh committee on pricing of petroleum products would be taken up later by the petroleum and the finance ministers. The exact timelines were also not announced. This would be marginally negative for the stock as more concrete steps were expected from the finance minister. |
| BHEL Ltd
| 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Hold
The framework for induction of super critical technology in NTPC’s large-capacity power plants will augur well for domestic power equipment cos. This will help Bhel to augment its product portfolio & graduate to the super critical level. Coupled with buoyancy in power generation, Bhel will have good visibility over a couple of years. |
| Reliance Industries
| 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Hold
Increase in MAT from 15% to 18% will negatively impact earnings of the company. However, the total impact will not be significant. Clarification on tax benefit under 80-IB on natural gas production for pre-Nelp and Nelp I-VII blocks did not come and that may add to the uncertainty in its stock price going forward. |
| Hindustan Unilever
| 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Hold
The government’s continued focus on the rural sector via higher allocation to NREGA to Rs 40,100 crore will enhance rural incomes and thereby, boost FMCG spending. This will drive volume growth and positively impact the earnings of HUL, which derives 50% of its revenues from rural India. |
| Hindalco Industries Ltd | 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Hold
The hike in excise duty is apparently looking negative. However, this would be a pass through by the company. Also, as Hindalco has its own captive power, the Rs 50/tonne levy on coal is not likely to have any negative impact. Strength in the dollar and Europe’s fragile condition may remain a concern. |
| Sterlite Industries
| 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Buy
Hike in excise duty will have no impact as it will be passed on to the end-users. Higher custom duty on silver will boost earnings from that segment. Focus on infrastructure spending will help the company boost sales volume of its base metal products in domestic markets. These may act as positive triggers for the stock. |
| Sun Pharmaceutical
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| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Hold
There will be a marginal impact of the Budget announcements on the company with respect to weighted average deduction on research and development investment (150% earlier to 200%) as the MAT rate has been increased to 18% and the excise rate has also been raised. Overall, we maintain a hold view on the stock. |
| ITC
| 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Hold
The excise duty on cigarettes increased substantially to 16% against an expected hike of ~5-6%. This is negative for ITC, as it would require the company to further hike prices by 6-7%, which in turn would cause volumes to remain flat to negative. This would negatively impact profitability per cigarette and earnings of the company. |
| Larsen & Toubro | 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Buy
The Budget has allocated 46% of total plan outlay towards infrastructure development. It has called for continued focus on urban & rural infra and road development. L&T will stand to benefit immensely. We stay positive from a budget perspective & also on overall fundamentals as FY11 will see revenue growth. |
| Tata Power
| 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Buy
Rise in MAT rate and an additional clean energy cess on domestic & imported coal will increase costs. TPC will be able to partially pass through the hike in cost for plants operating under the regulated mechanism, but will have to bear the cost for the capacities operating through merchant & captive route. |
| Tata Steel
| 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Sell
Hike in excise duty by 2%, which translates to Rs 600/tn will be passed on to end-users and increase in infrastructure spending with greater rural focus will boost domestic demand. We remain positive on the standalone operations but subdued performance of European operations has us worried on the company’s overall prospects. |
| TCS | 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Buy
Increase in MAT to 18% is marginally negative for TCS as the effective tax rates will inch up to 19% (ICICIdirect estimate:18%) for FY11 posing downside of 1.5% to earnings .Post-March 2011, when STPI expires tax rates for FY12 will shoot up beyond 23% resulting in 2.5% downside to current FY12 earnings estimates. |
| Wipro
| 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Buy
Increase in MAT from 15% to 18% is marginally negative for Wipro as the effective tax rates for FY11 will shoot up beyond 19% (ICICIdirect estimate:17.5%) impacting earnings. With expiry of STPI benefits post March 2011, MAT will not be applicable and effective tax rates will settle down at 23% plus. |
| Infosys Technologies | 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Buy
Increase in MAT from 15% to 18% is neutral only for Infosys as 11 out of 15 STPs have already exhausted their 10-year tax break window by March 2009 and only 4 more can pay up MAT till March 2011. So our previous assumption for effective tax rate of 25% from FY11 and beyond does not pose further downside risk to earnings. |
| Mahindra & Mahindra | 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Hold
Rise in excise duty on large cars, MUVs and SUVs by 2% to 22% and on LCV to 10% would result in an increase in prices by Rs 2,000 to Rs 50,000 plus. Hence, a demand dampener. However, rising disposable income on account of the change in income tax rate slab to mitigate the impact. Volume growth to continue. |
| Maruti Suzuki | 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Buy
Excise duty on small cars increased from 8% to 10% and large cars, MUV and SUV from 20% to 22%, resulting in a price rise of Rs 3,000-13,000 per vehicle. The rise in disposable income due to change in the I-T rates slab, however, to mitigate the impact, and we expect volume run to continue ~ 20% in the domestic market. |
| Tata Motors | 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Buy
Excise duty on small cars increased to 10% and larger cars, MUV and SUV, to 22% resulting in a price rise of between Rs 3,500 and Rs 18,000 per vehicle. Higher duties on LCV and M&HCV will impact prices. The increase in disposable income on account of the change in income tax rates slab will drive demand. |
| Hero Honda
| 
| Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History
Recommendation: Hold
Excise duty increased from 8% to 10%, which would result in a rise in price by Rs 600-2,800 per vehicle. However, the change in the I-T rate slab to increase disposable income in the hands of consumers will mitigate the impact of higher prices due to higher excise duties. We expect volumes to continue to grow at over 20%. |
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Enterprise IT Operations
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