Benchmark indices trade firm as FM unveils Union Budget 2011-12

The key equity indices, which lacked steam in past couple of sessions, barring Friday's rally on populist Railway Budget, got big sentiment booster from the Union Budget 2011-12. On the global front, rest of the Asian markets were trading mixed; while US index futures were trading in the negative territory. Back home, the benchmark indices -- Sensex and Nifty were up by around one percent at this point of time in trade led by across the board buying in public sector undertakings, oil & gas, capital goods, realty and fast moving consumer goods counters. The Finance Minister (FM) mentioned that Indian economy is back to pre-crisis growth trajectory and is set for double-digit growth in coming years, adding that food inflation is still a big concern, though he expects that average inflation will come down in FY12. There were lots of positive announcements. Surcharge on corporate tax has been reduced to 5% from 7.5% for domestic companies. The FM pegged the fiscal deficit at 4.6% during FY12. Besides this, FY11 industrial growth is seen at 8.1% and services growth at 9.6%. Also, the FM has announced that the direct tax code (DTC) will be implemented from April 1, 2012 and Goods and Services Tax (GST) bill will be introduced in this session of parliament. Broader markets though were up in the green pared some of their gains; the BSE Mid-cap and Small-cap indices gained 0.55% and 0.74%, respectively. The market breadth on the BSE was extremely robust; the gainers thrashed the losers in a ratio of 1620:950 while 110 shares remained unchanged.

The BSE Sensex surged 237.70 points or 1.34% at 17,938.61. The index touched a high and a low of 17,983.62 and 17,718.88, respectively.

The BSE Mid-cap and Small-cap indices gained 0.55% and 0.74%, respectively.

All the sectoral indices were trading in the green. Public Sector Undertakings (PSU) up 2.36%, Oil & Gas up 1.93%, Capital Goods (CG) up 1.87%, Realty up 1.72% and Fast Moving Consumer Goods (FMCG) up 1.19% were the major gainers.

Budget Highlights:

• Foreign dividend tax rate cut at 15% for Indian companies
• Invest linked Deductions for Fertilizers cos 
•  FY12 Net market borrowing target at Rs 3.43 lakh crore  
• No excise duty on Equipment for UMPPs  
• Ship owners allowed duty-free spare parts import  
• Cut customs duty on Petcoke, Gypsum to 2.5%  
• 20% ad-volorem Export Duty on Iron Ore  
• To replace excise duty with ad-valorem duties for Cement  
• Custom Duty on Raw Steel cut  
• Cut customs duty on yarn to 5% from 7.5%  
•  Peak rate for Custom Duty unchanged  
• 1% excise duty on 130 new items  
• Basic Food, Fuel exempted from Central Excise Duty  
• To keep the standard rate for Excise Duty at 10%  
• Direct tax sops to result in Rs 11,500 crore net revenue loss  
• Low withholding of tax of 5% for Notified Infra Funds  
• Service tax retained at 10%  
•  Surcharge reduced from 7.5% to 5% for domestic companies  
• To create Rs 5 lakh exemption limit for senior citizens above 80 years  
• SEZs to come under MAT  
• Income tax exemption limit raised to Rs 1.8 lakh from Rs 1.6 lakh 
•  MAT raised to 18.5% from18%  
• FY 13 fiscal deficit target at 4.1%  
• Rs 300 crore provided to promote pulses cultivation in rain-fed areas  
• FY 12 Fiscal Deficit seen at 4.6%  
• FY12 non tax revenue seen at Rs 1.25 lakh crore
• Multi nutrient based subsidy policy for Urea  
• Rs 21,000 crore allocation towards literacy mission  
• To move insurance, pension and banking bills in parliament  
• To introduce self assessment system in Customs  
• To raise rural infra fund from Rs 16,000 crore to Rs 18,000 crore  
• Banks to cover 2,000 villages for opening accounts in FY12  
• Easier service tax refund for goods exporters  
• To give Rs 8000 crore to J&K for development needs  
• SEZs to benefit from easier service tax refund  
• Rs 6000 crore to enable banks to maintain 8% TIER 1 capital  
• Healthcare sector to get allocation of Rs 26,760 crore  
• To infuse Rs 500 crore in Regional Rural Banks (RRBs)  
• To treat capital investment in fertilizer sector as Infra  
• To give Rs 5000 crore to SIDBI to refinance small firms  
• Mortgage risk guarantee fund for home loans to poor  
• Allocated Rs 58,000 crore for social schemes (Bharat Nirman)  
• Education sector allocated Rs 52,057 crore in FY12  
• To set up institution for tracking black money  
• Allocation for farm development hiked to Rs 7860 crore  
• QFIs allowed in to invest in MF scheme  
• FY12 IFCL disbursement target upped to Rs 25,000 crore  
• Direct cash subsidy on kerosene, fertilizers for BPL  
• PPP model has been positive in Infra projects  
• To raise corpus of rural infrastructure development fund to Rs 180 billion in 2011-12  
• To give 3% interest subsidy farmers in FY12  
• Propose to give Rs 3000 crore to NABARD  
• To set up national mission for hybrid, electric vehicles  
• Propose to introduce tax free bonds of Rs 30,000 crore for infra  
• Current A/C gap a concern due to composition of FX flows  
• To give infra status to cold storage chains  
• Rollout of DTC effective April 1, 2012  
• Increased the credit inflow from Rs 3,75,000 crore to Rs 4,75,000 crore  
• FII allowed to invest in Corporate Infra bonds 
• New companies bill to be introduced in current session  
• Upped priority home loan limit to Rs 25 lakh from Rs 20 lakh  
• Infra sector FII cap for bonds with 5 year residual maturity  
• To bring bill to enable RBI to give more private banking licenses  
• Capital infusion of Rs 20,157 crore in PSU banks in FY12  
• Investment in corporate bonds hiked to $40 billion  
• FIIs allowed to invest in MF schemes  
• Discussion on to further liberalize FDI policy  
• Divestment target at Rs 40,000 crore 

The top gainers on the Sensex were M&M up 4.52%, Maruti Suzuki up 3.95%, HDFC up 2.86%, L&T up 2.57% and ONGC up 2.51%.

On the flip side, Hero Honda down 1.89%, Rel Infra down 1.74%, Tata Power down 1.65%, Tata Motors down 1.28% and Hindalco Inds down 1.10% were the major losers on the index.

Meanwhile, Coal India (CIL) has decided to revise the coal prices effective from February 25, 2011, due to the revision of coal prices, the company would generate an approximate additional revenue of Rs. 650 crore in 2010-11 and Rs. 6200 crore in 2011-12.

The board gave the approval for the same at its meeting held on February 25, 2011.

Coal India is the largest coal producing company in the world, based on the company's raw coal production of 431.26 million tons in fiscal 2010. As of March 31, 2010, the company operated 471 mines in 21 major coalfields across eight states in India, including 163 open cast mines, 273 underground mines and 35 mixed mines, which include both open cast and underground mines. The company also produces non-coking coal and coking coal of various grades for diverse applications.

The S&P CNX Nifty rose 49.60 points or 0.94% to 5353.15. The index touched a high and a low of 5395.85 and 5312.25, respectively. 

The top gainers on the Nifty were IDFC up 6.08%, Rel Capital up 5.92%, M&M up 4.39%, BPCL up 4.03% and Maruti Suzuki up 3.86%.

On the flip side, Tata Motors down 2.36%, Ranbaxy Lab down 2.15%, Hero Honda down 2.05%, Rel Infra down 1.87% and Tata Power down 1.76% were the major losers on the index.

Rest of the Asian markets were trading mixed. Shanghai Composite rose 0.93%, Hang Seng rose 1.54%, KLSE Composite gained 0.24%, Nikkei 225 surged 0.92%; while Jakarta Composite dipped 0.14%, Straits Times soared 0.25% and Seoul Composite advanced 1.23%.

Stock markets in Taiwan will be closed today on account of a public holiday.

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