investment get a move on...maruti suzuki india unchanged excise duty on passenger cars is a strong...

...But St Didn’t Fan ItRingside View To put you on a firm footing in a choppy market, ET, in association with ICICIdirect —an arm of ICICI Bank — makes sense of what’s hot and what’s not among the 30 Sensex companies.This will not only help you stay ahead on the Street, but will give your portfolio that extra edge

Sensex 30

investorimpact on

Lower handset prices toboost rural wirelesspenetration; cos likeVideocon, Spice to gain

Higher farm credit willbenefit agri-based cossuch as Tata Chemicals,& United Phosphorus

FMCG, hospitality,consumer durables costo benefit from higherdisposable income

Sparing tobaccoproducts from taxhikes boosts ITC &Godfrey Phillips

UNION BUDGET 2011-2012

Hike in MAT to 18.5% from 18% will impact companies like Reliance Industries5

THE ECONOMIC TIMES | TUESDAY | 1 MARCH 2011

THROUGH THIS BUDGET, THEgovernment has continued tosupport the twin engines ofgrowth, namely, consumptionand investment. On the con-sumption front, by increasingexemption limits and keepingthe central excise rate broadlyunchanged, the government hassought to create a conducive en-vironment. It has also intro-duced several measures aimedat supporting agriculturalgrowth. The government hasalso sought to address the prob-lems relating to poor infrastruc-ture. A 23% increase in spendingon infrastructure is a clear indi-cation of its desire to tackle theproblem more aggressively.

The government’s commit-ment to fiscal prudence is anoth-er key takeaway. While it haskept a tight leash on expendi-ture, the revenue trajectory is ex-pected to be reasonable. Revenuereceipts are expected to increase3.6% and tax receipts 18%. Non-tax receipts are expected to fall43% in the absence of one-offgains. Controlling the deficitshould help rein in interest rateexpectations. By restricting gov-ernment borrowings, it has giv-

en the private sector greaterfreedom to access the debt mar-ket to fund its requirements.

The proposal for the mutualfund industry will help expandthe investor base and open up ad-ditional capital avenue. Therehas also been a marginal in-crease in dividend distributiontax for corporate investors, mak-ing it uniform at 30% for debtand liquid schemes.

While the over-all direction isencouraging,one must realis-tically assess theu n d e r l y i n gassumptions. Tomeet the govern-ment’s targets,not only do re-ceipts have to re-

main encouraging, but expensestoo have to be controlled. In par-ticular, the overall projection ofsubsidies appears to be low. Someof this will depend on the direc-tion of commodity prices, partic-ularly crude oil. Overall, the fi-nance minister has attempted tostrike a balance between imme-diate requirement for growth andthe long-term need for discipline.

Consumption,Investment Get a Move on

A 23% rise inspending oninfra is a clearindication ofgovt’s desireto tackle theproblemaggressively

Milind BarveManaging Director, HDFC AMC

Expert Take

This Budget should be positive for automobile (no increase inexcise), banks (controlled borrowing), and consumer goodscompanies (marginal reduction in direct taxes)

AUTO | BANKS | CONSUMER GOODS COMPANIES

SECTORS TOWATCH OUT FOR

WWW.ECONOMICTIMES.COM

Market Cap (`Cr) 93035

P/E Ratio 25.08

Dividend Yield (%) 0.82

Inst. Holding (%) 53.79

Sales (TTM in `Cr) 42214

Profit (TTM in `Cr) 3710

Larsen &Toubro

An increase ininfrastructureallocation by 23.3%will benefit L&T interms of order inflows. Hike in thelimit for FII investmentin corporate bonds to$25 billion also augurswell for the sector. L&T,being the leader, isexpected to benefitthe most.


P/E Ratio 14.36





Mahindra &Mahindra

The setting up of acleantech R&D fund is aboost for hybridvehicles which M&Mcan utilise throughrecently-acquiredReva. Increase in farmcredit to ̀ 4.75 lakhcrore, central exciseduty at 10%, and areduction in customsduty on agri machineryare the other positives.


P/E Ratio 15.26





Maruti SuzukiIndia

Unchanged excise duty on passenger cars is a strongpositive. Theestablishment of anR&D fund for hybridcars is a push towardsmore investment ingreen technology.Rising disposableincome due to lowerdirect tax will assistsmall car buyers.


P/E Ratio 37.07





RelianceIndustries


P/E Ratio 7.56





Reliance Comm

The company willbenefit marginallyfrom a rise in MAT andreduction in taxsurcharge. However,stagnating revenue,declining profitabilityand mounting debtpose a serious concern.While it may benefitfrom 3G launch andMNP-led churn, 2Gprobe remains a worry.


PE Ratio 19.56





RelianceInfrastructure

The extension of thesunset clause for thepower sector to March2012 bodes well asprojects commissionedthis year will get taxbenefits. The overallincrease in infra sectorallocation and FII limitfor infrastructurecorporate bonds arepositives forinfrastructure players.


P/E Ratio 13.86





State Bank ofIndia

Lower borrowings dueto reduced fiscal deficitwill keep G-sec yieldsunder control. Theimpetus to prioritysector lending fromincreased housingloans, priority sectorlimit of ̀ 25 lakh andadditional interest ratesubvention for short-term farm loans willhave no impact.


P/E Ratio 16.82





NTPC

The extension of thesunset clause (for taxholiday) for the powersector was onexpected lines. Weexpect incrementalcapacity addition of3,000 MW by FY12. Anincrease in MAT to18.5% from 18% and a2.5% cut in surchargewill neutralise theimpact on earnings.


P/E Ratio 11.63





ONGC

Customs duty on crudeoil unchanged at 5% isa positive for thecompany as grossrealisation will remainthe same as earlier.There is also no change in under-recoveries onpetroleum products,which would have no impact on thecompany’s margins.


P/E Ratio 11.51





Tata PowerCompany

The extension of thesunset clause for thepower sector was onexpected lines. Weexpect incrementalcapacity addition ofaround 1,850 MW byFY12. These projectswill enjoy tax benefitsin FY12. The companyfaces minimal risks for projects at thecommissioning stage.


P/E Ratio 8.03





Tata Steel

Unchanged excise rateis a neutral for thesector. However, anincrease in infraspending, with greaterrural focus, may spurdomestic demand. Weremain positive onIndian operations, buta subduedperformance of itsoverseas operationsraises concern.


P/E Ratio 20.97





Wipro

Sunset of STP and EoUclauses is neutral fortier-I companies, butmodestly negative fortier-II and IIIcompanies. MAT onSEZ is partiallynegative as it couldlead to higher cashoutflow. Improved ITbudgets, revival indeveloped geo-graphies will help.


P/E Ratio 12.22





SterliteIndustries

No change in exciseduty is a positive. Thedemand for copper,aluminium and zincmay remain robustdue to rising infraspending. This willhelp in increasing salesvolumes of the com-pany's base metalproducts in the dom-estic market wheremargins are higher.


P/E Ratio 25.79





TCS

Sunset of STP and EoUclauses is neutral fortier-I companies, butmodestly negative fortier-II and III com-panies. MAT on SEZ ispartially negative forthe sector as it couldlead to a higher cashoutflow. Rising ITbudgets and a revivalin developed geog-raphies are positives.

CMP: ` 1528.05 CMP: ` 614.10 CMP: ` 1206.70

CMP: ` 86.00CMP: ` 270.65CMP: ` 170.05

CMP: ` 964.95 CMP: ` 609.55 CMP: ` 2632.00

CMP: ` 1112.95CMP: ` 163.50

CMP: ` 1154.65 CMP: ` 605.95 CMP: ` 438.40

BROADLY SPEAKING, THEUnion Budget took a reasonableapproach to keep the economicgrowth momentum. However, incertain areas it should have beenlot more explicit. For instance,on the expenditure side, num-bers seem to be a bit too opti-mistic with only 3% growth bud-geted despite many social sector programmes.

Fiscal deficit at 5.1% of GDP in2010-11 is a positive. In FY12, thefiscal deficit is projected at 4.6%and 3.5% in 2013-14. The medi-um-term deficit reduction planis a positive, although we do ex-pect some slippage in FY12.

Net market borrowing for 2011-12 is seen at `3.43 trillion. Themarket found the net borrowingamount announced to be muchbetter than expected and treatedit as a positive because of thefear of crowding out private investments.

The decision to allow foreigninvestors to invest in equity mu-tual funds and to hike FII invest-ment limit in corporate bondsare huge positives and haveopened up a new route of oppor-tunity for Indian asset manage-ment companies.

On the sectoral side, the hike inexcise duty for cement is per-ceived as a negative since it mayerode the profit margins of com-panies which are already facinglower prices due to supply glut.

In the Union Budget for 2011-12, the finance minister pro-posed a 10% ad valorem dutyand `80 per tonne for cementwith retail price of up to `190per 50-kg bag. For retail price ofover `190 per bag, excise duty

has been revisedto 10% ad val-orem and `160per tonne.Cement makersare expected topass on the hikein excise duty toc o n s u m e r s .However, for theconsumer sector

this is a huge positive. The overall measure for the in-

fra sector is a long-term positive.In the oil and gas sector, themarket was expecting some an-nouncements for oil marketingcompanies, which did not hap-pen and, hence, is taken as a neg-ative. The announcements forthe banking sector are a positive.

Cement, InfraHave it Good butOil & Gas Trip Up

On thesectoral side,the hike inexcise dutyfor cementcompanies isbeing viewedas a negative

Sam Mahtani Director, Emerging MarketsPortfolio, F&C

Expert Take

ITC to profit from higher rural income. SBI to gain as inflation &interest rates will peak over the next 3 months. Bharti to benefitfrom an improved sector outlook. RIL poised to make gains

ITC | SBI | BHARTI AIRTEL | RIL | TATA MOTORS

STOCKS TOWATCH OUT FOR

CMYK

*ETM10311/ /05/K/1*

*ETM10311/ /05/K/1*ETM10311/1R1/05/K/1

*ETM10311/ /05/Y/1*

*ETM10311/ /05/Y/1*ETM10311/1R1/05/Y/1

*ETM10311/ /05/M/1*

*ETM10311/ /05/M/1*ETM10311/1R1/05/M/1

*ETM10311/ /05/C/1*

*ETM10311/ /05/C/1*ETM10311/1R1/05/C/1

BUY SELL HOLDSENSEX-30

Tata MotorsTata Motors is expected to utiliseJLR’s capabilities toeffectively use thepush towards greentechnology. Theunchanged exciseduty structurewill boostsentiment inthe near term.


P/E Ratio 7.73


Sales (TTM in Rs Cr) 116501


Lack of clarity on I-Tbenefit US 80IB onnatural gas production.Increase in MAT rate to18.5% and a 2.5% cut insurcharge mean theimpact on earningswould be neutral.

`2,06,183cr

Total assets as onMarch 31, 2010

HSBC InvestDirect Share Trading Services. For more details:SMS ‘HID’ to 575750Because trading opportunities are tricky to recognise.www.HSBC l nvestDirec t co i n HSBC �D InvestDirect

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investment get a move on...maruti suzuki india unchanged excise duty on passenger cars is a strong...

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