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Saturday, March 1, 2008

BUDGET IMPACT on various sectors

Here is a brief compilation of the effect this Budget will have on various sectors :

1.AUTOMOBILES : POSITIVE
Excise on 2 and 3 wheelers, small passenger cars reduced from 16% to 12%.

2.BANKING : POSITIVE with a caveat
PSU Banks are expected to face pressure on their net interest margins until the subsidy for waiver of agricultural loans and one time settlement of loans is released from the govt.

3.CEMENT : NEUTRAL
The govt. has increased budgetary allocation for roads under NHDP. This coupled with the govt.'s focus on Infrastructure & Housing development will be key drivers for raising demand. Appointing of a Coal regulator is a postive move as it will facilitate timely and proper allocation of coal (a key raw material) blocks to the core sectors, cement being one of them. From a differential excise duty levied last year, the budget proposes a flat rate of Rs.400 per MT bulk cement or 14% ad valorem, whichever is higher and cement clinkers excise duty at Rs.450 per MT. This move will not have much impact because most cement manufacturers have set up grinding units so they don't have to source clinker.

4.ENGINEERING AND CAPITAL GOODS : POSITIVE
Reduced excise duty on manufacturing goods will boost demand. Custom duties on project imports lowered. Overall, a good budget for engineering.

5.FMCG : POSITIVE
Reduction in taxes and waiver of farm loans will boost consumer demand. Increased consumption to boost volumes.

6.INFORMATION TECHNOLOGY : NEUTRAL
Higher spend on education is good news for training providers. But the service tax on customised software is a negative for technology companies but it will be passed on to the clients.

7.INFRASTRUCTURE : POSITIVE
Continued thrust on Infrastructure spending is good news. Major developmental schemes get vastly increased allocations. But service tax on works contract raised from 2% to 4%.

8.MEDIA : POSITIVE
Cheaper set top boxes is good news for direct to home operators and will help in digitisation of the TV Industry. More money for I&B Ministry.

9.OIL & GAS : NEUTRAL
No reduction in custom duties for crude oil and petroleum products. Marginally negative for polymer industry as costlier Naptha will push its cost structure upwards.

10.PHARMACEUTICALS : POSITIVE
Reduction in excise duty from the current 16% to 8% is a big positive for this industry. Increased allocation of funds for eradication of HIV/AIDS and polio and reduction in customs duty on certain life saving drugs from 10% to 5% is a positive for companies having product pipeline catering to these segments.

11.REAL ESTATE & CONSTRUCTION : NEUTRAL
Cut in peak CENVAT rate from 16% to 14% could benefit companies as raw material cost would come down. Increase in short term capital gains tax could increase tax liabilities for several companies.

12.RETAIL : NEUTRAL
Nothing specifically aimed at development of this sector. But Increase in threshold limit for personal income tax to result in a rise in disposable incomes thereby fuelling a growth in this sector.

13.TELECOM : NEUTRAL
Service tax, revenue sharing licence fee, spectrum charges unchanged. Cheaper data cards, convergence products. 1% excise duty on cellphones will make them more expensive.

14.TEXTILES : NEUTRAL TO POSITIVE
Integrated textile parks, upgradation gets a boost. Yarn banks on the anvil. Additional allocation to TUF to accelerate capital investment in the textile sector. Removal of National Calamity Contingent Duty (NCCD) of 1% on polyester filament yarn to benefit companies that have spinning capacities.

15.UTILITIES : NEUTRAL
Reduced 7.5% customs duty on project import to 5% to boost investments. Additional 4% duty of 4% withdrawn from power generation projects (other than mega power projects), transmission, sub-transmission and distribution projects, good for high voltage transmission projects.

Cheers!

22 comments:

Nagendra said...

Hi Superstar,

Quickly give your picks, so that it helps all the new buyers lookin for an oppertunity enter the market.

List all the companies which are goin to touch new highs taking the budget benefit and their upcomming annual results.

regards
Nagendra.

Nagendra said...

Hi Superstar,

Tell us which are the best buys in the following sector as the budget is positive for that sector.

1. Automobiles.
2. Banks
3. Engineering and cap goods
4. FMCG
5. Pharma
6. Textile
7. Infrastructure

which are the best picks in above sectors according to you as the budget seems to be positive for these sectors.

regards
Nagendra

shashjpn said...

Hi Superstar,
I had some fertilzer stocks(nagarjuna, chambal and oswal) with huge losses.
Can i expect any upward move in coming 6 months or can i book the losses at CMP. Please suggest in this. What is the near term target for DCB.
Thanks in advance.

manoj kogata said...

Hi Superstar,
I have some stock
Facor Steel 3400 @ 14.47
Jasch Ind. 300 @ 28.70
BSEL Infra 100 @ 113
GVK Power 100 @ 68
NTPC 100 @ 207
HEG 600 from 1994
RSWM 200 from 1994

Please suggest me for future of these stock. i can hold long term.

Thanks.

Sudeep said...

Hi Superstar,
i am following ur comments for a long time. sometime back u had recommended Aurobindo when it was trading around 470. i bought 10 @ 480. i require the money back somewhere in 2009 end. can i hold on to it? i've 50 IFCI @ 78. whats ur call on that?

Thanks
sudeep

Superstar said...

Hi Shashjpn,
I had indicated here earlier also that there was a huge speculative build up in Fertilizer stocks due to the budget. I am not expecting any big movement in any of the stocks named by you in the next six months except maybe an Oswal Chem. DCB is fairly valued at cmp according to me.

Hi Manoj,
If I was in your place, I would have got out of all your stocks except NTPC and invested the money in JKLAKSHMI CEMENT instead for long term.

Hi Sudeep,
Since you have a two year view, you can hold on to Aurobindo. The budget has been kind to it. IFCI depends totally on the whims of the management who may decide again on the terms of stake sale. I had earlier recommended a sell on it at 100 levels. I would much rather switch to some safer stock.

Hi Nagendra,
I can give you a few names off the cuff, without getting too much in detail.
Maruti, Allahbad Bank, BHEL, L&T, HUL, Aurobindo, Eastern silk etc.

Cheers!

ashok kumar said...

hi superstar

do you expect nifty to come down between 4200-4400. Seeing the budget, election indication is for july - august. Some of the good brokers are recommending to sell all the holdings now and buy at lower levels (4200 nifty). your comments?

regards

ashok

Surbhi said...

Hi Navin

Please advise me on the following:

I had invested around 2 lacs in cybermate at around Rs. 17 . Now that it has gone too low, do you think averaging it out and retreiving my money in this process will be a sensible idea?

Also, what further lows can it make according to you?

Please guide me on the same as i have a huge amount at stake in this.

Also, can you sugest some largecaps (just because i want to play safe) wherein i can earn some decent returns within a frame of 6 months.

With Regards
Surbhi

Rajeev said...

Hello Navin Sir,

How are you? I dont think Market is going to be back in action before 6-9 months from now based on US situtaion. US is in recession but they are not decalring it and waiting to revive. Fed rate will again cut by 50 points. This overall situation is imapcting Indian market very badly. Let us watch US financial data going to be declared this week. Well! This is a sit n watch situtalion. But still I am unable to control myself to buy few power sector/PSU banking shares in this sluggish market.
I just need a little advice from you on power stock, NTPC power finanac, power grid, PTC.
What shoudl be the bewst lowest price for these power shares.
Please Advise
Thanks
Rajeev

agc said...

Hai Havin,

Can you advise me on investing in Jayaswal Neco Limited for a long term basis at least for 6 months to 1 year at present as i have seen you advising earlier. Now i have been asked by my broker to do so. Pleae help
Regards
Girish

Superstar said...

Hi Ashok,
Brokers usually give the wrong advice to their clients. Brokers are not market experts, so I would be cautious in believing everything they say. More often than not, they have vested interests in any advice they might give you. At this moment, I do not see markets breaching the low of 4500 on the Nifty. Talking about 4200 levels on the Nifty is a bit premature right now.

Hi Surbhi,
You should have followed stop loss. I don't think that averaging now is a good idea. If you have cash to invest go for relatively better quality stocks rather than penny stocks.

Hi Rajeev,
I am good. Thanks. The whole world's markets are taking their cues from the US. I agree with you that market may take some more time before recovering. The second half of 2008 should be better than the first half. In the power sector, NTPC is the best pick and one can buy on dips for long term.

Hi agc,
If you have a long term view, you can start buying Jayaswal Neco in parts on dips.

Cheers!

Surbhi said...

Thanx for your advise Navin. Could you suggest some fundamentally good stocks that could be bought at present levels for decent returns for a frame of 6 months.

Between....i noticed some your pics of bandstand. Do u reside in Mumbai?? If yes, where? I am also residing in mumbai.

Surbhi

Rajeev said...

Thanks for advise Navin Sir.
Talk to you again soon.
Rajeev

Superstar said...

Hi Surbhi,
You can go for JKLAKSHMI CEMENT at current price. It is one of the best buys available in the market today.
Yes, I'm in Mumbai. I don't think its appropriate to give more personal details on a public forum. For personal communications, use email.

Cheers!

real value said...

Hi
CAn i go for jp hydro power since this has been corrected enough.keeping a view of 12 months.
Kindly advice........

ashok kumar said...

dear superstar

do u think utam galva steel(39/-) and seamac ltd (147/-) are value picks at this level. at what level do you suggest buying in these counters. uttam galva is trading at a PE below 3. semac was recommended to me at rs. 190/- as multibagger.

regards

ashok

Aman said...

Hi Superstar,

I would like to know your advice about SA Petrochem. I have 6000@21

Should i hold......i am ok with holding for 6-12 months if i can get decent return

let me know

Regards
Aman

Superstar said...

Hi Real Value,
I would not recommended buying power stocks, including JP Hydro, even now. There is still some room for downside. The valuations two months back had gone to crazy levels in that sector and there is still some more time before the prices become saner.


Hi Ashok,
Out of the two, Uttam Galva looks a better pick to me than Seamec. You can buy Uttam Galva on dips for long term.

Hi Aman,
Your purchase price of SA Petro is not too high. I am hopeful that you will make profits in it if you can hold it for six to twelve months.

Cheers!

ashok kumar said...

dear superstar

jayaswal neeco is trading at 37/-. when can i start buying this stock?
What should be the lower limit of this stock.

ashok

Superstar said...

Hi Ashok,
It is ok if you start buying Jayaswal Neco now. Not much downside is left if you take a long term view.

Cheers!

ashok kumar said...

dear superstar

what do you think, where the market will stop? out of jayswal neeco (32.90) and j.k. laxmi (113)which one is better buy . At what level ifci can be bought.

ashok

Superstar said...

Hi Ashok,
I think market is currently stuck in a range between 4500 and 5050. It has to break either of these levels to go anywhere decisively. Both Jayaswal Neco and JKLAKSHMI can be bought at current levels. I prefer JKLAKSHMI.
I would not buy IFCI at any level.

Cheers!