Budget expectation 2010. What a common man can expect


	BUDGET EXPECTATION-2010

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The Finance Minister will present budget on 26th of February, 2010. Budget will be an important event for the market as it will set tone and direction of the market. Budget 2010 also is significant because we are just recovering from the worst economic recession after 1929.
To pull the economy out of recession Government has given stimulus package of $40 billion. Now how and when this stimulus is going to be withdrawn is very important for the market. The withdrawal of stimulus will also test whether we are really out of recovery or not.
Other important thing that market will be looking in the Finance Minister speech will be the method of containing fiscal deficit, controlling inflation, change in direct tax structure, disinvestment of PSU and the 3G auction.

SECTORS AND THEIR WISHES

AUTO:
In 2009 Auto and Auto ancillary stock has good rally. Companies did well on back of fiscal stimulus by the government. We expect in the Budget 2010 government will hike the excise by 4% and the sector will be negatively affected.

Companies to be affected are
Maruti
Tata Motors
Hero Honda
Bajaj Auto

AGRICULTURE:
With food security being the priority and agri inflation needs to be controlled, government is expected to provide incentive to the sector in order to increase the productivity. More allocation of funds could be seen in the agriculture, irrigation and agri infrastructure.
Companies to benefit are
Jain Irrigation
Escort
RCF
Monsanto

CONSUMER DURABLES:
We expect roll back of stimulus and excise on consumer duarable to increase from 8% to 10%. The sector will have very marginal impact because FMCG companies have effective tax rate of less than 3%. So we maintain neutral.
Companies to be affected are
HUL
Whirlpool
Marico

FINANCIAL:
We expect to pass budget proposal for capitalization of PSU bank. This will be good news for bank with low Tier-1 capital.
Companies to benefit are
Dena Bank
OBC
UCO Bank

We also expect FDI hike for insurance sector in this budget.
Companies to benefit are
MAX India
All Insurance holding companies

INFORMATION TECHNOLOGY:
The IT companies are looking for an extension of the STPI scheme for another 2-5 years. The tax holiday that they have under the STPI scheme is going to end this fiscal. We expect Finance Minister will extend the scheme.
Companies to benefit are
Infosys
Wipro
HCL TECH
And other IT stocks.

INFRASTRUCTURE:
India needs massive investments in the infrastructure sector. The government has already started allocating funds for the infrastructure sector directly as well as through the public-private partnership (PPP) model.

As India has come out of the slowdown and various agencies are projecting an eight to nine percent GDP growth in the coming years, a special thrust on infrastructure development in this year's budget is expected.

OIL & GAS:
Companies in this sector are sharing huge subsidy burden. The roadmap by Finance Ministry to reduce large subsidy burden is expected.
Companies to benefit are
BPCL
HPCL
ONGC
GAIL
Also the clarification on 80IB deduction on Gas exploration for NELP will benefit the upstream player engaged in exploration.
Companies to benefit are
RIL
ONGC
Cairn India

POWER EQUIPMENT:
We expect scheme such as APDRP and RGGVY to continue.
Companies to benefit are
Crompton
Emco
ABB
Siemens

TELECOM:
The stocks in the telecom sector are facing stiff competition from new entrants in the market. Analysts believe the license auction to offer 3G services in the country is the next big event waiting to happen in this sector.

The government is expected to come out with the details of the 3G auctions during this year's budget season. The auction of 3G license is also one of the instruments to reduce the fiscal deficit.
Inclusion of tower companies into sec 80IA will improve the profitability of tower companies and thereby increases the chance of value unlocking by the telecom companies.
Companies to benefit are
Bharti
Idea
RCOM
GTL Infra

REAL ESTATE:
We expect following measures to be taken during the budget
Continuation of section 80IB of Income Tax Act (providing relief to builders for construction of units less than 1000 sq ft built up area in metros)
Increase in exemption limit under section 24(Interest on home loan) to increase from 15 lakh to 20 lakh.
Tax deduction at source to be brought down from 16.83% to 10% for individual home owners.
Township development to be given priority by providing infrastructure status to integrated township (exemption allowed under section 80IB).
Companies to benefit are
Unitech
DLF
Omaxe
HDIL

CONCLUSION:
We are looking forward for investor friendly budget. But government has its own constraint as stimulus cannot be given for long time. The reform in education, insurance sector to go through and 3G auction to take place in time. It is better for now to leave things on time how the budget will be and what reaction market will give on 26th February, 2010.

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