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CapitalVia - Special Report

BUDGETMANIA

2010

Edition : February10


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The Indian Markets have seen

a sharp rally from the

budget period of Feb.

2009 to the present Feb.

2010. The SENSEX in

the month of Feb.

2009 closed at 8891

and the NIFTY at

2 7 6 3 . 6 5 .C o m p a r i n g

the present value of Sensex

around 16200 and Nifty around 4900

both the indices have gained nearly 82.20% &

77.30% respectively. Where will the markets go

this budget no one knows? The Indian markets

have seen a big round of recovery on account of

the stimulus packages being announced by our

government and other measures being taken last

year to help the economy recover. The Indian

economy is in a better condition now and theIf you read the fiscal deficit numbers that haveGovernment may now plan out on how will itcome out for the year, we are running at fiscalrollback the stimulus package.deficit of close to 11%. This is not sustainable. So

The biggest concerns this Budget are the we need to get back to central deficit comingFiscal Deficit and the Rising Inflation. It is back below 5% in 2010-2011. Government willmost likely that the fiscal deficit is likely to get have no choice but to raise some taxes. Someprecedence in Budget considerations. The raise in taxations are expected mostly, as fiscalconsolidated Fiscal Deficit (including off-Budget deficit is close to 11%liabilities) is expected to be 10.30% in FY09-10.

Government's major focus will thus be on theOver the long term, this high level of deficit is not

steps it can take to reduce both the fiscal deficitonly unsustainable but could in fact derail theand the inflation. Apart from it the Governmentgrowth prospects themselves. The financing ofwill also take other steps which may impact ourthis fiscal deficit could fuel inflationary pressures,markets.as growth picks up and capacity utilization peaks.

In a scenario where inflation rates are alreadyWe are providing underneath the sectors and the

climbing steadily, this is not a satisfactory macro-stocks that can be in focus on any

economic environment to engender. Theannouncements made in that sector.

financing of the deficit could put pressure on

interest rates as well, thus handicapping any

monetary policy measures that may be

considered for containing the rising inflationary

expectations.

BUDGET MANIA 2010

y

(Rs.Crs.)

Year

Year

InflationRate


Special Report - Budget Mania 2010Edition: February 2010


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y



AUTO

Auto stocks will have direct impact on any announcements

being made in the sector on excise duties. If there is any hike in

excise duty the stocks will have negative impact whereas any

positive announcements or no hikes can have positive impact on

the stocks. Any rise in excise duty will be passed on to the

consumers which will be reflected in the higher prices they have

to pay for it and vice- versa.

Stocks to Watch:

TATAMOTOR, MARUTI, M&M, BAJAJ AUTO, HEROHONDA, ASHOK LEYLAND AND TVS MOTOR.

AGRICULTURE

Indian economy being an agricultural economy our

Government's focus will be on promoting agricultural activities.Rising inflation is also a worry thus increased allocation for this

sector will have a positive impact on the stocks in this sector and

vice-versa.

Stocks to Watch:

JAIN IRRIGATION, KRBL, RUCHI SOYA, KSOILS, CHAMBAL FERT.& NAGARJUNA FERTILIZER.

CEMENTS

The cements stocks will also be in focus as any hikes or reductions

in excise duties will have direct impact on this sector. A hike in

excise duty will have negative impact on the stocks as the end

consumer has to pay more prices for the product whereas any

decrease in the excise duty will positively impact the stocks.

Stocks to Watch:

ACC, AMBUJA CEMENTS, GRASIM AND ULTRATECH CEMENT.

BUDGET MANIA 2010


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y



F INANCIALS

The financial sector will be impacted by any announcements on

Loan Policies and increase or decrease in FDI Limit.

Stocks to Watch:

RELIANCE CAPITAL, KOTAK, INDIABULLS FINANCIAL, LICHOUSING FINANCE.

Better infrastructure facilities for India have been the priority of

Indian Government. Any increase in infrastructure spending by

the Government will help the construction sector to usher in

long term.

Stocks to Watch:

NAGARJUNA CONSTRUCTION, HINDUSTAN CONSTRUCTION,

UNITECH, PARSVNATH, GAMMON INDIA.

FMCG

The FMCG Stocks will be impacted by any hike/decline in excise

duty. A Hike in excise will lead to higher prices for the products

which ultimately will be passed on to the end consumer in terms

of increased price, thus any hike would have negative impact on

this sector and vice-versa.

Stocks to Watch:

ITC & HINDUNILEVER

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CONSTRUCTION


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RE AL ES TATE

Any revisions on raising the limits of interest rate deductions

available on housing loan interest payments will help the real

estate companies as the customer will be in a position to have

higher loans which will ultimately lead to higher demand for the

Real Estate Players.

Stocks to Watch:

DLF, UNITECH

METALS

Any increase in export duty on iron ore will have negative impact

on the stocks related to iron ore sector. Also increase in excise

duty will have adverse impact on the metals stocks and vice-

versa.

Stocks to Watch:

Increase in export duty on iron ore:

Increase in excise duty:

Stocks that will have negative impact are SESAGOA &JSWSTEEL.

TATASTEEL, SESAGOA, JSWSTEEL, SAIL etc.

PHARMA

Pharma sector is a priority sector. Any rebates or deductions

related to R&D and promotional activities will give a boost to this

sector which will have positive impact on the stocks of this sector

and vice-versa.

Stocks to Watch:

DR. REDDY, SUNPHARMA, GLENMARK and LUPIN.

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