A mixed bag for corporate India
Tue, Mar 2 02:45 PMThough the markets reacted positively to the budget on Friday, it did not bring good news for allcompanies and sectors. Here's an analysis of how it will impact different industries.The stock markets gave a rousing welcome to the budget on Friday, mostly due to what was 'not'announced than what was. The main reason for the optimism was that there were no unpleasantsurprises and some of the negative announcements had already been factored in before thebudget. Auto stocks, for instance, extended gains as the market had already factored in the rise inexcise duty on large cars and sports utility vehicles. On the other hand, a lower fiscal deficit(which will result in lower government borrowing) soothed the stock market's nerves and anoverhauled personal tax structure was a pleasant surprise that promises to boost consumption andbring in the much-needed feel-good factor for retail investors.The government continued incentives for some industries like real estate, infrastructure andagriculture while it cushioned the impact of duty hikes on other sectors by keeping them to theminimum. Though the markets have got something to cheer, after the consolidation over the pastfew weeks, factors like weak global cues could spoil the party in the future. Giving a word of caution, Sunil Godhwani, MD & CEO, Religare Enterprises says, ''The market rallied on verylow expectations from the budget and will fall in line with the real issues ahead which includecorporate earnings growth visibility, growth in domestic consumption and global headwinds.''The budget has also been positive for the hotel industry. Irrespective of the location, two-star orabove hotel categories have been allowed 100 per cent deduction on capital expenses. Currently,only specified categories of the hotels in the national capital region enjoy incentives. These sopswill benefit Indian Hotels and Hotel Leela.
''The budget strikes a balance between growthand fiscal discipline. The direct tax reductions will stimulate demand driven growth whilethe increase in indirect taxes will help meet the deficit target of 5.5 per cent
,'' says RugvedDhumale, assistant V-P, Risk Management Solutions, Mecklai Financial Services.Broadly, the budget is a balanced one with the finance minister laying down a road map to fiscalconsolidation and increased spending on infrastructure. In the coming years, the finance ministeraims to bring down fiscal deficit to 5.5 per cent in 2010-11, 4.8 per cent in 2011-12, and 4.1 percent of the GDP in 2012-13. The budget also allows an additional deduction of Rs 20,000 forinvestment in long-term infrastructure bonds over and above the existing deduction limit of Rs 1lakh on tax savings. This will not only help tax payers but also help in financing infrastructuraldevelopment.Here is an analysis of how specific sectors (and stocks) are likely to be impacted by the measuresannounced in the budget.