Date : February 29, 2008

Budget Highlights 2008-2009

 

Budget 2008-09 is on expected lines. We clearly knew this is the last Budget of the government and hence, social sector had to get the biggest dose of outlay. The focus of the budget has been to boost consumption coupled with keeping inflation under control. This being an election year, some populist measures were expected - the loan waiver scheme for farmers was a measure. The reduction in Excise Duty on several sectors/ products will give a boost to consumption. The positive surprise came from the change in Tax Slabs in respect of Personal Income Tax.

However, increase in Short Term Capital Gains Tax from 10% to 15% has come in as a negative surprise, which probably the markets were not prepared for. We believe this was a move which the finance minister could have avoided since the move can dent the market sentiment and may not lead to substantial increase in collections for the government. Moreover, the move to allow STT being allowed as expenditure may not be good news for arbitrageurs and brokerages who were earlier allowed to offset STT against their tax liability.

BUDGET HIGHLIGHTS

• Nothing for the investor: No change in STT and DDT unchanged at 15%.
• IT exemption limit hiked from Rs1 lakh to Rs 1.5 lakhs, Senior Citizens and Women get more.
• Poll Bonanza: FM announces loan waiver to marginal and small farmers.
• Agriculture gets special thrust; Major investments planned in irrigation projects.
• No change in corporate tax; surcharge remains.

IMPECT OF BUDGET ON VARIOUS SECTORS:

Auto - 2 & 3 Wheelers
Cut in Excise Duty in 3 Wheelers to 12%; positive impact on Bajaj, M&M.
Cut in excise duty on 2 wheelers to 12%; positive impact on Hero Honda, Bajaj Auto, TVS

Auto - Cars & Jeeps
Cut in Excise Duty on Small Car to 12%; positive impact on Tata Motors, Maruti, Bajaj

Auto - LCVs/HCVs
Excise Duty Cut from 16%-12%; positive impact on Ashok Ley, Maruti, Tata Motors.

Auto - Tractors
Higher Agri Credit: positive impact on For Punjab Tractors, Jain Irrigation.

Banks - Public Sector
Subvention Payment To Neutralize negative Impact on PSU Banks.
Govt. to Waive Off Agri Loans; Negative For PSU Banks.
Higher Rural Thrust; PSU Bank's Credit Quality To Be Impacted.

Cement - Major
Excise Duty On Clinker Upped to Rs 450/tonne; negative impact for Ultratech, Kesoram.

Computers - Software
Smart Cards for PDS, National Electronic Trading Projects; TCS, HCL in Focus.
Educational sector: Employment pool for KPO's will benefit IT sector.

Computers - Software - Training
20% Higher Outlay For Education; positive impact on Educomp, Everonn, Aptech, NIIT.

Computers - Software Medium/Small
No extension of tax holiday for EOU/STPI; Neutral Tech stocks.

Construction & Contracting - Civil
Increased Allocation to Bharat Nirman Program; positive impact on For Infra Sector.

Electrical
10% Higher Defense Allocation; positive impact on BEL, BEML, Astra Micro, Zen, M&M.

Engineering - Heavy
Customs Duty on Project Imports Cut; positive impact on Engg, Power Co.
Corporate Bond Mkt To Reduce Interest Costs; positive impact on For Infra Cos: PwC.

Fertilizers
Farmer Oriented Policies: positive impact on For Oswal Chem, Deepak Fert.
Shift To Nutrient Based Subsidy Mooted: positive impact on Fertiliser Co's.
Fertilizer Subsidies To Continue

Finance - Investments
DDT Rationalization To Benefit Investment Holding Cos.

Hospitals & Medical Services
New Hospitals set up eligible for tax holiday under section 80I(B).

Hotels
Section 35D benefit extended to service companies.

Miscellaneous
Tax Benefit for Healthcare & Tourism Cos: positive impact on for Sectors.
Farmer Oriented Policies: positive impact on For Advanta, Kaveri Seeds.
Reduction Of CENVAT positive impact on Impact On Manufacturing Industries.

Paper
Increase In Education Spending; positive impact on For Malu Paper, Rama Newsprint.

Pesticides/Agro Chemicals
Seed Co's to get 150% deduction on R&D expenses; positive impact on Monsanto, Advanta.

Pesticides/Agro Chemicals
Higher Focus on Seed Cultivation; positive impact on Monsanto, Advanta.

Pharmaceuticals
Reduction Of Excise Duty positive impact on Pharma Sector.
Weighted Deduction for outsourced R&D; positive impact on Pharma Cos.
Excise Rate Cut; positive for AIDS Drug Cos: PwC.
Increased Focus On Health Sector; positive For Pharma Cos.
Higher Outlay For Polio, HIV Eradication; positive impact on Panacea Biotech & Cipla.

Plantations - Tea & Coffee
Excise Duty Cut Tea Industry positive Impact: PwC.
Crop Insurance Scheme for Tea; positive impact on Jayshree Tea, Williamson, AssamCo.

Power - Generation/Distribution
Urge To Open Bidding For Five More UMPP's: Power Gen Co's In Focus.

Power - Transmission/Equipment
New T&D Fund; positive impact on Areva T&D, Jyoti, Emco.

Printing & Stationery
Increase In Education Spending; positive impact on For Paper Prod, Todays Writing.

Refineries
Imported Naptha For Polymer Will Attract Duty; negative impact Reliance.
NELP VII focus; positive impact on For E&P Cos and FDI in Oil & Gas Sector.

Steel - Medium / Small
Decrease In Steel Melting Scrap to NIL.

Steel - Tubes/Pipes
Higher Irrigation Outlay; positive impact on Welspun Guj, Jindal Saw, Ratnamani.

Telecommunications - Service
Higher Outlay for Swan Project; Focus Tulip IT.

Textiles - General
Higher TUF Outlay; positive impact on Textile Co's.

Thanks & Regards,
PMS Department

INFORMATION SOURCE: moneycontrol.com