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...

year which spells opportunity for listed PSUs including BHEL which is struggling with a weak order book and earnings. Banking: Check Graph

Cement

AS WAS expected, the cement industry did not see any change in excise duties. Moreover, there was no benefit in terms of excise duty cuts on inputs like coal. However, the increased thrust towards infrastructure projects— whether in the form of building new airports via the public-private partnership route, warehousing infrastructure, higher focus on rural and urban housing or allocating `7,060 crore towards 100 smart cities—is expected to indirectly lead to better demand growth for the industry. Providing incentives to corporates to set up manufacturing plants is likely to boost demand for cement. However, the increased royalty payout by mining companies to state governments will adversely impact the input cost for cement players which is slight negative. Cement: Check Graph

Fertiliser

The fertiliser sector is set to get an indirect boost from a number of agri-cultural policies that the FM has announced. The Budget has provided an additional `5,000 crore for fertiliser (indigenous urea) subsidy while stating that a new urea policy will soon be formulated. Stressing the need to sustain an agricultural growth rate of 4% through higher productivity and better irrigation, the FM proposed setting aside `1,000 crore towards the “Pradhan Mantri Krishi Sinchayee Yojana” scheme. Indirectly, agri companies may benefit by the extension of interest subvention scheme to farmers for short-term crop loans. Under this scheme, banks can extend loans to farmers at a concessional rate of 7%. `100 crore has been set aside to set up an “Agri-Tech Infrastructure Fund” to promote agro-technology development, and to create and modernise existing agri-business infrastructure. Fertiliser: Check Graph

FMCG

The Budget has evoked a mixed reaction from the FMCG industry. Soap companies like HUL and Godrej Consumer Products cheered the proposed reduction in customs duty on oils for soaps from 7.5% to nil. But the increase in excise duty on cigarettes in the 11 to 72% range is a big negative for ITC. The government has reduced excise duty on machinery used in the manufacture of fruit juices and on packaging machinery from 10% to 6%, a positive for Dabur, Parle Agro and PepsiCo India. The proposed increase in excise duty on carbonated drinks will impact soft drinks majors in the country. The new government may move ahead with the introduction

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