Union Budget and the Stock Markets: Basics over big-ticket measures

Jul 11 2014, 12:48 IST
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A section of the Street, however, found the adherence to the FY15 fiscal deficit target at 4.1% of the GDP aggressive. A section of the Street, however, found the adherence to the FY15 fiscal deficit target at 4.1% of the GDP aggressive.
SummaryWhile it lacked big bang reforms that could have excited the market, Budget...

for the domestic automobile industry, he announced steps that could indirectly create demand and revive the sector. The FM had earlier extended the excise duty concessions beyond June 30 for a period of six months up to 31st December 2014. Industry believes that the emphasis on infrastructure, mining and agriculture in today's Budget will indirectly boost demand for the auto sector. Further, the direct tax reduction will put as much as `30,000 in the hands of middle income families, which is expected to give a good push to 2-wheeler sales. Focus on agriculture and mining is expected to revive commercial vehicle sales. The proposed increase in the composite cap on FDI in defence manufacturing to 49% could also help auto companies like Mahindra & Mahindra and Bharat Forge. Automobiles: Check Graph

Banking & Financial Services

The Budget, without giving a clear picture on capital infusion into public sector banks, said these banks will be allowed to raise capital by increasing retail shareholding in a phased manner while the government will retain its majority shareholding. The interim Budget in February this year had announced `11,200 crore capital infusion in FY15. The FM's move to incentivise banks with exemption in cash reserve ratio (CRR), statutory liquidity ratio (SLR) and priority sector lending (PSL) requirements for long-term borrowing for infrastructure lending was welcomed by bankers as it would provide public sector banks with greater liquidity. Jaitley said the government will examine a proposal to give greater autonomy to PSU banks. The FM also announced six new debt recovery tribunals (DRTs), and added that effective means for revival of other stressed assets will be worked out. Banking: Check Graph

Capital Goods

Although there were no key announcements that directly impact capital goods companies, some companies are likely to see a positive fallout of the increase in FDI caps and higher planned capex expenditure for PSUs. The FM proposed raising the composite cap on foreign direct investment in defence manufacturing to 49% from the existing 26% with complete Indian management control, through the FIPB route. The rationale behind the move was the considerable outflow of foreign exchange in a sector where India is currently the largest buyer in the world. L&T is likely to benefit from the relaxation of defence FDI norms. Jaitley also said that public sector units (PSUs) will make a capital investment of `2,47,941 crore in the current financial

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