The budget is all over and barring the odd criticism whose position and stature in life makes it imperative that they criticize, by and large the budget has been appreciated by the majority of people. It could have been better say quite a few and yet some others say there should have been big bang reforms. When queried what would qualify as big bang there are no answers. I believe that the budget has direction, intent, clarity and a roadmap for the immediate future.
Vital issues like GST, the time has been announced while DTC has been virtually shown the door. GAAR has been deferred for two years and more importantly clarified that it would be prospective effect. Virtually all issues concerning the inflow of capital or money from investors have been amicably resolved. Issues like tax residency of fund manager, tax as a pass through for REIT’s and AIF’s have all been allowed. Further the government has made a change in share ownership and removed the distinction between FII and FDI where 100% investment is allowed.
The government has made infrastructure a focus area and reintroduced tax free bonds to be used by roads, railways and ports. The importance of our minor ports and using the same for transportation will be used to the maximum. The need of the hour is to cut wasteful expenses, reduce expenditure on subsidies and ensure that the leakages in the system are minimised. These issues have been given priority and efforts taken to ensure that the same is introduced and speeded up.
There seems to be some confusion on proceeds from divestment taken in the budget. However there is clarity on the fact that clause49 of the listing agreement has to be complied with where government holding or promoter holding would have to be brought to 75% at maximum. Secondly the shares held by SUUTI primarily Axis Bank, ITC and L&T are to be sold and also remaining shares in Hindustan Zinc and BALCO. If one does some preliminary calculation on these the figure is more than 1 lac crs and for this to happen the markets have to remain buoyant.
FII’s will like the fact that fiscal deficit target of 4.1% has been achieved and over the next three years would be reduced to 3%. The CAD would be less than 1.3% and also that the government has presented for the first time ever a federal budget with states getting a direct 42% share in revenue and with grants increasing to 62% of revenue.
The real joker in the pack was the increase in excise duty on tobacco and cigarettes which saw ITC being hammered out of shape. The other was the increase in service tax which has been raised from 12.36% to 14% including the cess and surcharge.
I believe the budget has done its bit and now it’s the turn of corporates to perform. The last few quarters have seen our markets doing extremely well and valuations are no longer cheap. Therefore for share prices to move up earnings have to increase.
Hoping for the best and quite confident that corporates will respond to the challenge.
Wishing all readers a Happy Holi and the advent of Spring.
Budget has Market and Investor written all over it
Performance of Newly Listed Shares as on 20th February 2015
| Name | Date of listing | Issue Price | closing price | closing price | % gain loss | change over |
| 20th February | 13th February | over week | lssue price | |||
| Sharda Cropchem Limited | 23rd September | 156.00 | 268.65 | 261.60 | 4.52 | 72.21 |
| Shemaroo Entertainment Limited | 1st October | 170.00 | 210.30 | 216.60 | -3.71 | 23.71 |
| Monte Carlo Fashion Limited | 19th December | 645.00 | 541.75 | 522.05 | 3.05 | -16.01 |
Volatile budget week ahead
The mother of all weeks in terms of volatility is here. SEBI has seen merit in keeping markets open on all important budget day and Saturday will see trading as a normal day from 9.15pm to 3.30pm. What FM Arun Jaitley has in store for us will be known only on Saturday while what PM has on his agenda, one would get glimpses in the railway budget on Thursday 26th February when February series expires and on Friday 27th February when the economic survey is presented.
The open interest at the end of Friday is 1.08 lac crs which is higher by about 15% compared to the levels when the February series began. The markets rose for the first three days of the week and then Friday saw a correction where a substantial portion of the gains of the week were lost. The week closed positive with gains of between 1/3rd and ½ %.
The first round of e-auction of coal locks has been completed and estimates for the remaining coal blocks to be auctioned put the CAG figure of 1.76 lakh crs as an understatement. The CAG Vinod Rai when stating this figure was ridiculed by the then senior ministers of the UPA government with claims of ZERO loss and so on. This auction proves a major point for the NDA government and the expected revenue from Spectrum sale would help in reducing fiscal deficit and raising resources for the infrastructure needs of the government.
The present value of NIFTY is lower by 118.75 points or 1.33% compared to the close of the previous January series. Readers would also recall that the correction began from that day and lasted about two weeks before the smart recovery. Global cues saw Greece again in a crisis over their debt issues and there is no resolution so far. Dow Jones gained 121.09 points or 0.67% to close at 18,140.44 points. The Indian Rupee lost 3 paisa or 0.05% to close at Rs 62.22. FII”S returned to their buying ways after a period of about two weeks and were net buyers of Rs 4,650 crs while domestic institutions were buyers of Rs 460 crs.
The budget will be interesting as the government has benefited significantly from falling crude prices and currently diesel too is sold at market prices. To safeguard falling revenue and crude price increase in future, the excise duty on petro products has been raised over 3-4 occasions providing a safety factor for future.
What does the common man expect from the budget? In simple terms that living his life e made easier. Inflation has eased off and the general expectation or demand this time around is that there be more disposable income in his hand. If Arun Jaitley the FM is able to achieve this he would have secured the confidence of the voter and the common man. The overseas investor wants clarity on law and the assurance that there would be no retrospective amendments of law, something which has already been clarified and would be implemented in the budget.
The expectations from this budget are on the higher side and in the short term they may not be met. One should not be surprised that budget day sees the markets closing weak but not necessarily weak or in the red for the week. One note of caution is that the markets are here to stay and will be there even on Monday. Simply don’t buy because one person on TV whether it be a guest or the anchor believes the particular sector will benefit, but buy if you understand what the implications would be. Many a times one finds that there is a benefit under one section or head and a corresponding loss or disadvantage on another which is announced in the latter part of the budget. Don’t trade impulsively for short.
