MFF – 100228 – 15:54 Hrs

The most awaited event i.e. the union budget finally got presented in the parliament and the stock market immediately gave it a thumbs up, not because of anything positive in the budget, but since it had no negatives in it. The market spent whole of February in a tight and boring range due to so many negative expectations from the budget which the FM may announce. Market was expecting across the board increase in the excise duties and some were expecting even introducing tax on long term equity investments. All these didn’t happen cheering the market and a sharp up tick in the Sensex was seen the moment increase in personal tax slabs were announced, the gains did not last long as others things came out of the bag later.

The 400 odd points increase which the Sensex saw did not last long since there were no big bang announcements on the projects which the government would spend on. For instance we were expecting a road map on how Kamal Nath would be able to achieve his target of constructing 20 kms of roads daily which could have been a big boost to infrastructure was totally missing. No commitment on the rural sector now puts a question mark on how a double digit growth is possible? NDA was building 32 kms of roads daily, UPA-1 under Mr.T.R.Balu was building mere 2 kms of roads hence Kamal Nath’s target of 20 is genuinely good for the country if he is able to deliver it.

Hence when the FM started his speech everyone felt that it’s actually time for India to Think Big and many announcements would be made. Nothing materialized! Still the big thing is we would, as individuals be saving Rs.2000 to Rs.4000+ per month by way of lower taxes. That’s a big amount on monthly basis in this inflationary economy. The real savings after factoring the price rise which would come in due to fuel price hike may still be negligible. Hence we recd from only one hand of the government and they are taking away by the other.

For markets as said above no negative itself is a big positive. FII’s were expecting some tinkering on PN’s and DTT which could have been negative, but since both were left untouched FII’s put in 800 odd crores on the budget day into the secondary markets. The justification by the FM and PM that the excise duty on fuel was reduced when crude was at 120 and since its back to 80 should be hiked back does not go well with anyone. Are they predicting that crude can’t go back to 120? Don’t they know that almost Rs.3 hike in Diesel and Petrol prices would increase further the inflation which already our cricket minister (at times agri minister) Sharad Pawar is not able to handle?

Focus on Education and commitment on issuing more banking licenses would see both the sector boom a bit. Be ready to see all our biggies open their own banks. Nandan Nilekeni gets more work under the UADAI with a 1900 crs outlay. Divestment target of Rs.40000 crores is a meek target if the government seriously looks into the way they are and are going to disinvest in future.

Good incentive for those opening NPS accounts but wtill may not be a great success untill they keep advisors like us away from the project. Certain rules brought in may be negative for infra companies not completing projects within the specified time limits. Hence better for investors to deal with reputed companies.

Hence overall nothing good for the markets from the budget and nothing much bad either. This will take away the lingering fear and may help our market to realign with the global cues when we open on Tuesday. Long term remains good and if GST is implemented on 1/4/2011 as promised will help further. Our target remains around 20000 on Sensex as mentioned in our earlier postings. Certain stocks we are bullish on from budget point of view are Everonn, MIC Electronics, Bartronics, Jyoti Structures, Moser Baer etc.,

Wish you all a Very Happy & Colorful HOLI

Jai Hind.

Vivek Karwa



Office Mobile: +91 98-405-405-75

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Stock Specific Disclosure: We hold all the stocks mentioned above in our personal portfolio.

Disclaimer: Investing in Equity & other Similar markets can be risky. The recommendations and views mentioned are based on certain expectation’s which may or may not occur. The author thereby, will not be Liable for any loss incurred, monetary or otherwise. Seeking personal advice from your Financial Planner is recommended before acting on any of the substance given herein.

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