281_budget+2015-16_analysis+by+hem+securities

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Budget 2015-16: An Analysis

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STATE OF ECONOMY

Inflation declined - a structural shift

CPI inflation projected at 5% by the end of the year, consequently, easing of monetary policy.

Monetary Policy Framework Agreement with RBI, to keep inflation below 6%.

GDP growth in 2015-16, projected to be between 8 to 8.5%.

Housing for all - 2 crore houses in Urban areas and 4 crore houses in Rural areas.

Basic facility of 24x7 power, clean drinking water, a toilet and road connectivity.

TAXES PROPOSALS

Objective of stable taxation policy and a non-adversarial tax administration.

Fight against the scourge of black money to be taken forward.

Efforts on various fronts to implement GST from next year.

No change in rate of personal income tax.

Proposal to reduce corporate tax from 30% to 25% over the next four years, starting from next financial ye

Rationalisation and removal of various tax exemptions and incentives to reduce tax disputes and improveadministration.

Exemption to individual tax payers to continue to facilitate savings.

Wealth-tax replaced with additional surcharge of 2 per cent on super rich with a taxableincome of over Rscrore annually.

Service-tax lus education cesses increased from 12.36% to 14% to facilitate transitionto GST.
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Budget 20015-16 Sectoral Impact

Auto-Posit ive

In Budget 2015-16, custom duty on commercial vehicle increased from 10 % to 40%. Budget stated that period Concessional duty structure on electric/hybrid vehicles extended upto March 31, 2016. It also proposed for highAgricultural credit of Rs 8.5 lakh cr (as against Rs 7 lakh cr in previous year) and increased allocation towards ruinfrastructure. Budget also proposed an initial outlay of Rs 75 cr for faster adoption and manufacturing of ElectVehicles.

Major Beneficiaries: Ashok Leyland, Eicher Motors

Banking-Positive

Budget stated that Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of Rs 20,0crores, and credit guarantee corpus of Rs 3,000 crores to be created. MUDRA Bank will be responsible for refinaning all Micro-finance Institutions which are in the business of lending to such small entities of business throughPradhan Mantri Mudra Yojana. An autonomous Bank Board Bureau to be set up to improve the governance of pulic sector bank. Budget also stated that NBFCs registered with RBI and having asset size of Rs 500 crore and abomay be considered for notifications as Financial Institution in terms of the SARFAESI Act, 2002. Budget proposto infuse Rs 7940 cr capital to PSU banks against expectations of Rs 18000 cr. Budget stated that distinction btween different types of foreign investments, especially between foreign portfolio investments and foreign direct i

vestments to be done away with & replacement with composite caps.Limit of deduction of health insurance prmium increased from Rs 15000 to Rs 25000, for senior citizens limit increased from Rs 20000 to Rs 30000.Budgstated that Gold monetisation scheme to allow the depositors of gold to earn interest in their metal accounts and tjewellers to obtain loans in their metal account to be introduced .Sovereign Gold Bond, as an alternative to purching metal gold scheme to be developed

Major Beneficiaries: SBI, Axis bank,Yes bank

FMCG- Negative

Budget stated that excise duty on cigarettes increased by 25% for sub-65 mm cigarettes. Excise duty on tobacco creased to Rs 70/kg from Rs 60/kg.

Major looser: ITC


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Footwear- Positive`

In Budget, excise duty on footwear with leather uppers and having retail price of more than Rs 1000 per pair rduced to 6%.

Major Beneficiaries: Relaxo, Bata

Financial Sector- Positive

Budget stated that Public Debt Management Agency (PDMA) bringing both external and domestic borrowings uder one roof to be set up this year. It also stated that enabling legislation, amending the Government Securities Aand the RBI Act included in the Finance Bill, 2015. It stated that Forward Markets commission to be merged wSEBI. It stated that Section-6 of FEMA to be amended through Finance Bill to provide control on capital flows equity will be exercised by Government in consultation with RBI. It recommends proposal to create a Task Force establish sector-neutral financial redressal agency that will address grievance against all financial service provideGovt stated that India Financial Code to be introduced soon in Parliament for consideration.

Major Beneficiary: :MCX

Infrastructure-Positive

Budget provided for sharp increase in outlays of roads and railways. Budget stated that National Investment and Ifrastructure Fund (NIIF), to be established with an annual flow of Rs 20,000 crores to it. Budget provided for Tfree infrastructure bonds for the projects in the rail, road and irrigation sectors. It also stated PPP mode of infstructure development to be revisited and revitalised. SETU( Self-Employment and Talent Utilization) to be estalished as Techno-financial, incubation and facilitation programme to support all aspects of start-up business. Budget, Rs 1000 crore to be set aside as initial amount in NITI. Also, Ports in public sector will be encouraged,corporatize, and become companies under the Companies Act to attract investment and leverage the huge land rsources. Budget stated that Rs 5,300 crore to support micro-irrigation, watershed development and the PradhMantri Krishi Sinchai Yojana. States urged to chip in. Budget provided Rs 25,000 crore in 2015-16 to the corpusRural Infrastructure Development Fund (RIDF) set up in NABARD; Rs 15,000 crore for Long Term Rural CreFund; Rs 45,000 crore for Short Term Co-operative Rural Credit Refinance Fund; and Rs 15,000 crore for Sho

Term RRB Refinance Fund.

Major Beneficiaries: L&T ,Bel ,Adani Ports, Bharti Infratel


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IT, Media& Entertainment, Technology-Positive

Rate of Income-tax on royalty and fees for technical services reduced from 25% to 10% to facilitate technology in

flow.

MetalPositive

Increase in basic custom duty of Metallergical coke from 2.5 % to 5%. Budget also stated that tariff rate on iron ansteel and articles of iron and steel increased from 10% to 15%. In Budget, SAD (Special Additional Duty) is reducin metal scrap of iron and steel, copper, brass and aluminum from 4 percent to 2 percent.

Major Beneficiaries: Tata Steel, JSW Steel

Power-Positive

Budget proposed 5 new Ultra Mega Power Projects, each of 4000 MW, in the Plug-and-Play mode. Budget set ttarget of renewable energy capacity revised to 175000 MW till 2022, comprising 100000 MW Solar, 60000 MWind, 10000 MW Biomass and 5000 MW Small Hydro. Budget stated that balance of 50% of additional deprection @ 20% for new plant and machinery installed and used for less than six months by a manufacturing unit ounit engaged in generation and distribution of power is to be allowed immediately in the next year. In Budget,cleenergy cess increased from Rs 100 to Rs 200 per metric tonne of coal, etc. to finance clean environment initiatives

Major Beneficiaries: Power Grid, Swelect Energy, NTPC

Real Estate-Positive

Budget provided for rationalisation of capital gains regime for the sponsors exiting at the time of listing of the unof REITs and InvITs. Also, Rental income of REITs from their own assets to have pass through facility.

Major Beneficiaries: Prestige Estate


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