Immediate Take on the Union Budget

 

Nothing much was expected from this Budget and our FM met these expectations…..I had not expected any Amnesty Scheme or bold vision or dramatic reform announcements….too many pressures and pulls and compulsions being faced by this UPA Government currently

 

Markets were however buoyant from Morning and post budget speech Sensex surged over 500 points at one time reaching 18297 prompting me to alert clients that these gains will reverse….they did by over 400 points in the last hour or so,although Sensex closed up 122 points….more a relief rally really + some short covering

 

Macro Concerns are yet intense…Interest rates…Inflation…Oil Prices….global tensions in MENA…..FM really had his hands tied

…with inflation high he had to put monies into the hands of the People…his Direct taxes sops will lose Rs 11500 crs for the Government….he is recovering these from Indirect Taxes

…..he seems to have misunderstood what we wanted for our Infants and Women !…he has reduced the Excise Duty on Diapers and Sanitary Napkins from 10% to 1% !

 

He also seems to have worked backward to put a lid on the fiscal deficit….gave a % & number to it…4.6% of GDP at 4.12 lakh crs,lower in % terms but slightly higher in absolute terms than this year, and then adjusted other heads !…for example subsidies ,especially fuel look too low at Rs 23000 + crs

….he has targeted 9% GDP Growth rate for 2011-12….looks challenging as in 2010-11 we have seen 8% + every quarter…and Corporate Earnings may be impacted next fiscal year as Interest Rates remain high

….and the Deficit will continue to be funded by strong Government Borrowings of Rs 3.43 lakh crores…with this pressure and high Inflation  expect Interest Rates to firm up some more !…they are already at 10% levels

 

Markets got an unexpected  positive in that FM announced that Foreign Nationals that meet KYC norms will be allowed to invest in Equity Schemes of SEBI registers Mutual Funds….this opens out a whole new class of investors to tap…..KYC norms would mean these Foreign nationals would require PAN numbers 

 

Direct cash Subsidies to Below Poverty Lines Indians for LPG,Kerosene and Fertilisers in a good first step to eliminate malpractices in subsidy distribution….UID is yet a year away to use as an efficient platform for financial inclusion and distribution of resources  

 

First Draft Guidelines for issuing fresh banking licenses will be released by RBI by March 31,2011….host of Companies are planning to apply…IDFC,IFCI,L & T,India Bulls,Bajaj Finance,Birlas,Reliance Capital……expect robustness in such scrips in March

 

Largely a Bottom up Approach in Stock Selection is indicated to be a better strategy

A more elaborate Budget Special is going out to clients shortly…. demystifying the figures and UPA mindset on Policies and Strategies and Thrusts….will blog some interesting extracts

….in the meantime expect the Sensex to meander in March

Cheers !