Investor's Eye: Budget Special: Sticks to basics, no fanfare

 

Investor's Eye [July 10, 2014]  Sharekhan www.sharekhan.com

Summary of Contents   SHAREKHAN  BUDGET SPECIAL     Sticks to basics, no fanfare   The Union Budget for FY2014-15 offers no Big Bang proposals but is well grounded with focus on boosting confidence of investors as well as corporate India in a bid to revive the investment cycle and attract household savings into financial assets. Another key positive of the budget is the clarity on tax administrative regime to make it less adversarial and introduce steps to reduce tax disputes. Lastly, the finance minister in all his earnestness has shown intentions to improve the quality of government spending with higher allocations for infrastructure (roads, railways, ports etc). On the flip side, the finance ministry fell short of expectations on repealing retrospective tax changes in case of certain controversial tax amendments. The Street would have also expected more specifics on raising resources for recapitalisation of banks. Lastly, the gross market borrowing figure is marginally higher at Rs6 trillion though the finance minister aspires to limit the fiscal deficit to 4.1% of the gross domestic product (GDP). Overall, the budget is positive for the equity market due to the steps taken to encourage foreign portfolio investments (charging capital gains tax instead of tax on business income and making dividend taxable in the hands of investors) and attract domestic household savings into financial savings instruments (higher tax exemptions under section 80C; tax rationalisation on dividend income from mutual funds). Moreover, we expect policy announcements (especially the politically tough decisions to curtail subsidies) outside of the budget. With major policy events behind us, corporate earnings expected to show signs of a pick-up and valuations at comfortable level, we believe that the biggest risk to the stock market is more global than local in the near future.  Key gainers from budget proposal: HDIL, IRB Infrastructure Developers, Container Corporation of India, Gateway Distriparks, Relaxo Footwear, Bata, Cox & Kings, Bharat Electronics, Aditya Birla Nuvo and Max India  Key losers from the budget proposals: ITC, VST Industries and Titan   Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

Regards,  The Sharekhan Research Team

 

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