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This report will provide you with details regarding the expectations form the Budget 2009. In
this we have not tried to showcase the expectations we have from the budget but have
provided the consensus expectations of different brokerage houses/institutions
We strongly believe that the media hype surrounding the current budget is completely
unjustified, since this is just the first budget the UPA government is delivering after its
reappointment and there are four more to go. The media has tagged this budget to be the
once in a life time event but they fail to understand that Mr. Mukherjee has clearly stated that
implementing reforms takes time
S&P have already downgraded the outlook for India’s sovereign debt rating from stable to
negative and any further increase in deficit would lead to a cut in India’s rating from BBB-
minus and bringing India to speculation grade from the current investment grade
Historically markets on most of the occasions have disappointed after budgets and the main
reason is that they expect miracle from budget which have rarely being delivered. So we
expect this budget to be the normal budget with focus to be more on “AAM AADMI” reforms
and some on the privatization and priority areas
Agenda
• Highlights
• Historic Pre/Post Budget Market Movements
• Fiscal Deficits
• Taxation
• Sectoral Consensus Expectations
Highlights
Fiscal Deficit
• The FM is faced with a fiscal deficit of more than 6%
(combined with sates a fiscal deficit of around 11% of the GDP)
and the target of FY10 may not be too different. Thus to raise
additional funds divestments is PSUs, and relaxation of FDI
norms
• The government could also announce steps to ease supply
side bottlenecks for commodities since inflation is not an
immediate concern
• Though the street is expecting the government to remove
STT, CTT, this move is highly unlikely given kind of exchequer
they are to the government
Year F2008 F2009 Aggregate
Schemes US$bn % of GDP US$bn % of GDP US$bn
Oil subsisdy 19 1.60% 22 1.90% 41
Fertilizer Subsidy 11 0.90% 24 2.10% 35
NREGS 3 0.30% 7 0.60% 10
Farm Loan Waiver n/a n/a 13 1.10% 13
Sixth Pay Com m ission n/a n/a 5 0.40% 5
Additional Fiscal Stim ulus n/a n/a 28 2.40% 28
Total 33 2.80% 99 8.50% 132
Market Movement Post/Pre Budget Month
Where
this
time?
Taxation
No major changes in Direct Tax Rates Expected
Direct & I ndirect Tax FY09 FY08 Growth(%)
Reduction in excise
Likely, expectation is that To further promote Positive for players
Excise duty applicable for duty.Large cars invite a
the difference would domestic industry and catering to the particular
large cars duty of 21% compared to
contract growth end of the segment
8% for small cars
Stocks
• Mahindra & Mahindra
• Tata Motors
Banking
Issues Industry Wish list Expectations Rationale Impact
Stocks
• AXIS BANK
• BANK OF BARODA
• INDIAN BANK
• PUNJAB NATIONAL BANK
• UNION BANK
Cement
Stocks
• Shree Cements
• Prism Cements
• India Cements
• ACC Ltd
Construction
Issues Wish list Expectations Rationale Impact
Simplification of policy
Simplifying procedures
and regulatory
for implementation; Simplification of projects Positive for players
framework for faster
higher allocation in to attract more players having adequate
implementation.
Roads budget; change the and will enhance experience and net
Increaseing VGF cap for
revenue model on modernisation and worth to bid for the
supporting non viable
annuity basis for select upgrading of highways project
projects;Higher
projects
budgetary allocation
Faster environmental
Positive for players
clearances;Higher fund
Will increase fund Results in increase level having expertise in
Irrigation allocation through
allocation of irrigation irrigation and water
accelerated irrigation
projects
benefit programme
Positive for most of the
Inline with governments construction companies
Urban Infrastructure Higher fund allocation Increased fund
focus of infrastructure focused on urban
Development through JNNURM allocation
creation infrastructure
development
DDT exemption is likely
Extension of tax
to benefit many Positive for players
Introduction of Section exemption on inter
Likely to be extended companies since most carrying out projects in
80M corporate dividends
of them have multi layer separte SPV structure
further one step down
holding structure
Research House Consensus
Stocks
• IVRCL
• Simplex Infra
• Nagarjuna construction
• Sunil Hitech
• Unity Infraprojects
Capital Goods
Issues Wish List Expectation Rationale Impact
Imposition of 10%
customs duty on import of
power plant equipment for To promote investment in
Status quo to be
Customs duty both the projects awarded power sector and increase No impact
maintained
through the international generation capacity
compettive bidding route
and mega power plant
Import duty on certain
Not to be included in
capital goods like Status quo to be To retain the viability of
sensitive list for zero duty Positive
boilers,rolling mills, maintained the capital good sector
under WTO obligations
hydraulic turbine etc
Interest on infrastructure To garner funds for
Infrastructure bonds bonds to be included Likely development of Positive
under 80C infrastruture sector
The planning commission
has proposed setting up a
national Electricity fund
Positive for T&D
with a corpus of Rs 1000 To garner funds for
equipment companies like
Funding bn-1500 bn to finance Likely development of
ABB, Areva, Siemens and
development of power infrastruture sector
Crompton
T&D network by state
utilities so as to reduce
T&D losses
Impact on rural To make power available Positive for transformer
Rural Electrification Likely
electrification to continue to all makers
Research House Consensus
Stocks
• Crompton Greaves
• Voltamp
• BHEL
• L&T
• Blue Star
• AIA Engg
FMCG
Stocks
• ITC
• HUL
• Britannia
Information Technology
Stocks
• Mphasis
• HCL
• Infosys
Logistics
Issues Wish list Expectation Rationale Impact
Foreign airlines would Help the aviation
Allow foreign airlines
be allowed to take companies to reduce
FDI in aviation to take stakes in Positive
49% stake in debt improve
Domestic airlines
domestic airlines efficiences
To be reduced form
Sales tax on ATF(Air Staus quo to be Future revenue
30% in some states to No impact
Turbine Fuel) maintained implications
4%
Reduction in
Centralised toll Road map to be stoppage time would
Toll Policy Positive
mechanism outlined lead to to greater
efficiency
Some more initiatives Some firm steps for
Infrastructure related to be taken for faster better infrastructure
key thrust area Positive
to roads and ports development of the related to ports and
roads and ports roads
Some firm steps for
Fixed schedule for
Dedicated rail freight better infrastructure Boosting trade
implementation to set Positive
Corridor related to ports and activities
up corridor
roads
It would lead to
Modernization of
Modernization of rail Some firm steps for quicker turnaoound of
terminal and rail Positive
freight implementation container and non
handling facilities
container cargo
Research House Consensus
Stocks
• Container Corporation
• Gateway Distriparks
• Mundraport
• Redington
Media
Issues Wish list Expectation Rationale Impact
Service
tax:Broadcaster are
Broadcaster expect Positive for
subject to levy of Classification for print
parity to be drawn Status quo will be broadcaster and
service tax @12.24% in industry status is
betwwen the print and maintained ngative for print
unlike the print media different
electronic media companies
that is exempt from the
levy of service tax
Reduction in FBT from
20% bto 5% for
Expected to be High Administrative
FBT personnel working for Postive
removed cost
print & electronic
media companies
CVD(Counter Vailing
To be made nil duty to provide a filip to
Duty):8% levied on Likely Positive
items platforms like DTH
digital set top boxes
To bring broadcasting
SAD(Special
equipment like set top
Additional Duty):4% To be made nil duty Positive for DTH
Likely boxes on par with
levied on digital set top items players
rates applicable on
boxes
telecom equipment
Research House Consensus
Stocks
• Jagran Prakshan
• UTV
• Zee News
Metals & Minings
Issues Wish list Expectation Rationale Impact
Governments revenue
collection has been badly
Industry wishes that there Likely ,Excise duty on hit which in turn badly
Excise duty increase is no roll back on the steel may be raised from impact infrastructure Marginally negative
reduction in excise duties 8% to 10% or 12% development and
ultimately hit steel
demand
To anable India to deal positive for steel
with the global economic companies with higher
Infrastructure spending
Continue with great thrust Likely crisis and aim at leading exposure to long products
push up
the economy to a 7% plus and sponge iron
growth in the coming year producers
China has recently
introduced 9% rebate on
export of HRC and its
Positive adequate
likely negative impact on Positive for steel
protection to the domestic Likely impostion of 5-10%
Safeguard duty imposition Indian steel companies companies with exposure
firms against imports of safeguard duty on HRC
can be negated with this to falt products
cheap steel products
action.Positively impacts
governments revenue
collection
Big positive for companies
To help plug the growing
with captive coal mines
demand supply gap as it
Coal sector deregulation Deregulation Likely and those interested in
would boost India's
entering the lucrative but
domestic coal output
restrictive
Research House Consensus
Stocks
• Sesa Goa
• SAIL
• Tata Steel
• JSW
Oil & Gas
Issues Wish list Expectation Rationale Impact
Stocks
Pharmaceuticals
Issues Wish list Expectation Rationale Impact
Exemption under
To encourage
section 80, for
Tax exemption u/s 80 Likely companies to focus on Positive
promoting R&D in this
R&D
sector
Funds to support
small and medium Scheduling up a fund Likely To encourage SMEs Positive
enterprises
Research House Consensus
Stocks
• Dishman Pharma
• Glenmark Pharmaceuticals
Power
Removing witholding
Neutral for NTPC but
Withholding tax tax imposed on Likley
positive for UMPPs
foreign borrowings
To maintain
Extension of benefits
801A tax benefit Likely attractivenessof the Positive
beyond 2010
sector
Research House Consensus
Stocks
• NTPC
• PowerGrid
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