際際滷

際際滷Share a Scribd company logo

Impact of budget 2010 on capital market

Download as PPTX, PDF
Abhishek
Abhishek

The budget provides a sector-wise analysis of the impact on capital markets. Key points include: 1) The budget aims to consolidate recent gains in development and address weaknesses in governance. It also provides capital to public sector banks and regional rural banks. 2) The stock market saw sharp gains since 2009 and gave a positive response to the budget. The lower fiscal deficit will mean lower government borrowing. 3) Sectors like automobiles, infrastructure, consumer goods, and rural development are expected to see positive impacts, while the telecom sector may face pressure from tax increases. 4) Overall the budget focuses on growth, rural development, and strengthening of the banking system, which are expected to benefit many

1 of 53
Download to read offline
Impact of budget 2010 on Capital MarketPresented byPoojashuklaAbhishekjangidAmitgampawarSauravsharmaAdityaguptaRoopamsinghNavneetsharma
Whats in store for this year?Double Digit growth path.
Harness economic growth to consolidate the recent gains in making development more inclusive.
Address the weaknesses in government systems, structures and institutions at different levels of governance.
RBI to give additional banking licenses to private sector players. NBFCs could also be considered, if they meet the RBIs eligibility criteria.Contd.Rs.16,500 crores provided to ensure that the Public Sector Banks are able to attain a minimum 8% Tier-I capital by March 31, 2011.Government to provide further capital to strengthen the RRBs.Extension of existing interest subvention of 2 per cent for one more year for exports covering handicrafts, carpets, handlooms and small and medium enterprises.
Impact on your walletIf you are in stock market then definitely you will be keen to know how the much awaited 2010 budget will impact on your stock holdings. After doing detailed analysis through different mediums we have tried to answer your questions in much appropriate and easy way. Below is the sector wise analysis post budget
Trend in Stock Market- Respect to budgetIndian 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 2763.65.Comparing the present value of Sensex around 16200 and Nifty around 4900 both the indices have gained nearly 82.20% & 77.30% respectively. 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.
Contd.The Indian economy is in a better condition now and the Government may now plan out on how will it If you read the fiscal deficit numbers that have rollback the stimulus package. come out for the year, we are running at fiscal deficit of close to 11%.
What is Fiscal deficit ?The difference between total revenue and total expenditure of the government is termed as fiscal deficit.It is an indication of the total borrowings needed by the government.A deficit is usually financed through borrowing from either the central bank of the country or raising money from capital markets by issuing different instruments like treasury bills and bonds.
Impact of budget 2010 on capital market
BUDGET MANIA 2010
Budget 2010 & Capital MarketLower fiscal deficit in the financial year ahead, resulting in a lower government borrowing, soothed the stock markets nerves.Stock markets gave a rousing welcome to the Budget and rose immediately as the FM presented his speech.2 % hike in excise duty for sectors like cement, capital goods and autos.
Impact on various sectors
Automobile sectorIt is not that much impacted, this sector has shown solid signs of recovery thanks to stimulus package which is intact thereby no negative comings in this sector.The industry is expected to grow 12-13% in 2010-11 in value terms, led by commercial vehicle and passenger car sales.Commercial vehicle volumes are estimated to rise 15-17% in 2010-11 due to sustained economic growth. Exports will grow 13-14%.
Automobile sector
Banking and Finance sectorIt is also having some positive impact. The government has proposed a Rs 16,500-crore Tier-I capital infusion in 2010-11, which is significantly higher than Rs 1,200 crore provided in 2009-10.This will further meet credit demands which are expected to increase owing to economy recovery and increase in exports. Banks could hike deposit rates in to meet credit demand, leading to a 20% growth in deposits.
Contd.Appropriate Banking facilities to be provided to habitations having population in excess of 2000 by March, 2012.Insurance and other services to be provided using the Business Correspondent model. By this arrangement, it is proposed to cover 60,000 habitations.Augmentation of Rs.100 crore each for the Financial Inclusion Fund (FIF) and the Financial Inclusion Technology Fund, which shall be contributed by Government of India, RBI and NABARD.
FINANCE SECTOR
BANK SECTOR
Cement sectorAs long as infrastructure activities goes on increasing cement sector will boom. In order to meet demands companies have increased manufacturing capacity thereby lowering operating cost. However 2% hike in excise duty will have an negative impact. So overall you can say positive effect.
CEMENT SECTOR
Agriculture SectorRs. 400 crores provided to extend the Green RevolutionRs. 300 crores provided to organize 60,000 pulses and oil seed villages in rain-fed areasRs. 200 crores provided for sustaining the gains already made in the green revolution areas through conservation farmingFCI to hire godowns from private parties for a guaranteed period of 7 yearsAgriculture credit flow through banks to be set at a target of Rs.3,75,000 Crores
Contd.For farmers loans upto 3 lakh at 7% p.a.Agriculture sector has grown by 2.4%.Record rice production at 98.04 million tonnes. 14 national agricultural projects approved.Central assistance for storm water drainage project increase to Rs.500 crore from 200 crore.Rajeev Gandhi Krishivikasyojana allocation up by 30%.
AGRICULTURE SECTOR
Infra-structureHuge investments have been projected for coming years.Additional deduction available for investment in long-term infrastructure bonds for individuals will improve fund availability. Additionally, concession on import duty for monorail projects would reduce capital cost for players. So all positives for infrastructure sector.
Contd.Rs 1,73,552 crore provided for infrastructure development which accounts for over 46% of the total plan allocation.Allocation for road transport increased by over 13% from Rs. 17,520 to 19,834 crores.Rs 16,752 crore provided for Railways, which is about Rs.950 crore more than last year.
INFRA STRUCTURE
Consumer sectorsDemand for colour TVs, refrigerators, washing machines ,LCDs etc is ever increasing. Increase in tax saving slab will decrease tax paying liabilities thereby further boosting up disposable income and ultimately consumer sector. All positives for this sector too.
CONSUMER SECTOR
Power sectorThe budgetary allocation for the sector, excluding Rajiv Gandhi GrameenVidyutikaranYojana (RGGVY), has been raised to Rs 5,130 crore from Rs 2,230 crore. A clean energy cess of Rs 50 per tonne will be levied on domestic and imported coal.There will be a marginal pressure, though, on companies which sell power in the open market.Solar, small hydro and micro power projects at a cost of about Rs.500 crore to be set up in Ladakh region of Jammu and Kashmir.
POWER SECTOR
Steel IndustryThe most promising sector has shown faster than expected recovery from economic downturn. Increase in infrastructure and automobiles has increase its demand and supply scenario. Profitability of steel companies is expected to continue in coming years. So lot of positives for steel sector.
STEEL SECTOR
Telecom sectorSubscriber base expected to increase but continuous fall in profits due to lowering tariff plans and increase in minimum alternate tax to 18% from 15% will negatively impact the profitability of telecom service providers. So negative impact on this sector.
TELECOM SECTOR
Oil and Gas sectorSubsidy on petroleum products will be disbursed as cash to oil marketing companies (OMCs). Increase in customs duty across crude oil and petroleum products would translate in higher duty protection for refiners. The resultant increase in refinery gate prices for retail auto and cooking fuels, if absorbed by OMCs, would translate in a rise of almost Rs 11,000-14,000 crore in under-recoveries in 2010-11.
Contd.Bio-diesel custom duty lowered.
To develop and set up national gas grid.
Tax incentives will be provided on capital expenditure on the laying and operating of cross country natural gas, crude or in pipe line networks for excise duty on naphtha reduced to 14%.OIL SECTOR
Textile sectorsThe extension of 2% interest subvention on pre- and post-shipment export credit till March 31, 2011, will help small exporters reduce interest costs. The hike in excise duty on man-made fibres and yarns will increase polyester prices by Rs 1.50 to Rs 2 a kg, but the manufacturers will be able to pass the hike, as polyester continues to be cheaper than cotton. The government announced a one-time grant of Rs 200 crore to Tamil Nadu for the installation of a zero-discharge system to reduce environmental pollution at the Tirupur cluster. This will help knitwear exporters in the long term.
TEXTILE SECTOR
Precious MetalOn gold and platinum from Rs.200 per 10 grams to Rs.300 per 10 grams .On silver from Rs.1,000 per kg to Rs.1,500 per kg .Basic customs on Rhodium - a precious metal used for polishing Jewellery reduced to 2 per cent .The excise duty on refined gold made from such ore or concentrate reduced from 8% to a specific duty of Rs.280 per 10 grams.
PRECIOUS METAL
Defence SectorAllocation for Defence increased to Rs. 1,47,344 crore including Rs 60,000 crore for Capital expenditure.About 2,000 youth to be recruited as constables in five Central Para Military Forces from Jammu and Kashmir in the year 2010.
DEFENCE SECTOR
Rural sectorRs. 66,100 crore provided for Rural Development.Allocation for Mahatma Gandhi National Rural Employment Guarantee Scheme stepped up to Rs.40,100 crore in 2010-11.Unit cost under IndiraAwasYojana increased Rs.45,000 in the plain areas and to Rs.48,500 in the hilly areas.
Contd. Allocation to Backward Region Grant Fund enhanced by 26 per cent from Rs.5,800 crore in 2009-10 to Rs 7,300 crore in 2010-11.Additional central assistance of Rs 1,200 crore provided for drought mitigation in the Bundelkhand region.An amount of Rs.48,000 crore allocated for rural infrastructure programmes under Bharat Nirman.
RURAL SECTOR
Medical SectorUniform, concessional basic duty of 5 per cent, CVD of 4 per cent with full exemption from special additional duty prescribed on all medical equipments.Full exemption currently available to medical equipment and devices such as assistivedevices, rehabilitationaids etc.Specified inputs for the manufacture of orthopedic implants exempted from import duty.
MEDICAL SECTOR
IT SectorThere have been no specific announcements made which should affect the IT sector directly but the UIDAI (Unique ID Authority of India) project has been approved and Rs. 1900 crores have been allocated to it. The project will most likely be handled by Indian IT companies so this should be good.Also, Rs. 31000 crores have been earmarked for school education reforms in 2010-2011; which will probably be a boost for the IT sector in the long term.
IT SECTOR
ConclusionIncreased borrowing from the government will make the corporate difficult to borrow. As government increased expenditure in infrastructure, defence and other expenditure this will have indirect positive impact on the industries.Government push for rural development is going to see a new growth area opening up for the FMCG companies as their disposal income will increase .Companies working in the rural sector will definitely will be the prime beneficiary in the coming years.

More Related Content

Impact of budget 2010 on capital market

  • 1. Impact of budget 2010 on Capital MarketPresented byPoojashuklaAbhishekjangidAmitgampawarSauravsharmaAdityaguptaRoopamsinghNavneetsharma
  • 2. Whats in store for this year?Double Digit growth path.
  • 3. Harness economic growth to consolidate the recent gains in making development more inclusive.
  • 4. Address the weaknesses in government systems, structures and institutions at different levels of governance.
  • 5. RBI to give additional banking licenses to private sector players. NBFCs could also be considered, if they meet the RBIs eligibility criteria.Contd.Rs.16,500 crores provided to ensure that the Public Sector Banks are able to attain a minimum 8% Tier-I capital by March 31, 2011.Government to provide further capital to strengthen the RRBs.Extension of existing interest subvention of 2 per cent for one more year for exports covering handicrafts, carpets, handlooms and small and medium enterprises.
  • 6. Impact on your walletIf you are in stock market then definitely you will be keen to know how the much awaited 2010 budget will impact on your stock holdings. After doing detailed analysis through different mediums we have tried to answer your questions in much appropriate and easy way. Below is the sector wise analysis post budget
  • 7. Trend in Stock Market- Respect to budgetIndian 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 2763.65.Comparing the present value of Sensex around 16200 and Nifty around 4900 both the indices have gained nearly 82.20% & 77.30% respectively. 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.
  • 8. Contd.The Indian economy is in a better condition now and the Government may now plan out on how will it If you read the fiscal deficit numbers that have rollback the stimulus package. come out for the year, we are running at fiscal deficit of close to 11%.
  • 9. What is Fiscal deficit ?The difference between total revenue and total expenditure of the government is termed as fiscal deficit.It is an indication of the total borrowings needed by the government.A deficit is usually financed through borrowing from either the central bank of the country or raising money from capital markets by issuing different instruments like treasury bills and bonds.
  • 12. Budget 2010 & Capital MarketLower fiscal deficit in the financial year ahead, resulting in a lower government borrowing, soothed the stock markets nerves.Stock markets gave a rousing welcome to the Budget and rose immediately as the FM presented his speech.2 % hike in excise duty for sectors like cement, capital goods and autos.
  • 14. Automobile sectorIt is not that much impacted, this sector has shown solid signs of recovery thanks to stimulus package which is intact thereby no negative comings in this sector.The industry is expected to grow 12-13% in 2010-11 in value terms, led by commercial vehicle and passenger car sales.Commercial vehicle volumes are estimated to rise 15-17% in 2010-11 due to sustained economic growth. Exports will grow 13-14%.
  • 16. Banking and Finance sectorIt is also having some positive impact. The government has proposed a Rs 16,500-crore Tier-I capital infusion in 2010-11, which is significantly higher than Rs 1,200 crore provided in 2009-10.This will further meet credit demands which are expected to increase owing to economy recovery and increase in exports. Banks could hike deposit rates in to meet credit demand, leading to a 20% growth in deposits.
  • 17. Contd.Appropriate Banking facilities to be provided to habitations having population in excess of 2000 by March, 2012.Insurance and other services to be provided using the Business Correspondent model. By this arrangement, it is proposed to cover 60,000 habitations.Augmentation of Rs.100 crore each for the Financial Inclusion Fund (FIF) and the Financial Inclusion Technology Fund, which shall be contributed by Government of India, RBI and NABARD.
  • 20. Cement sectorAs long as infrastructure activities goes on increasing cement sector will boom. In order to meet demands companies have increased manufacturing capacity thereby lowering operating cost. However 2% hike in excise duty will have an negative impact. So overall you can say positive effect.
  • 22. Agriculture SectorRs. 400 crores provided to extend the Green RevolutionRs. 300 crores provided to organize 60,000 pulses and oil seed villages in rain-fed areasRs. 200 crores provided for sustaining the gains already made in the green revolution areas through conservation farmingFCI to hire godowns from private parties for a guaranteed period of 7 yearsAgriculture credit flow through banks to be set at a target of Rs.3,75,000 Crores
  • 23. Contd.For farmers loans upto 3 lakh at 7% p.a.Agriculture sector has grown by 2.4%.Record rice production at 98.04 million tonnes. 14 national agricultural projects approved.Central assistance for storm water drainage project increase to Rs.500 crore from 200 crore.Rajeev Gandhi Krishivikasyojana allocation up by 30%.
  • 25. Infra-structureHuge investments have been projected for coming years.Additional deduction available for investment in long-term infrastructure bonds for individuals will improve fund availability. Additionally, concession on import duty for monorail projects would reduce capital cost for players. So all positives for infrastructure sector.
  • 26. Contd.Rs 1,73,552 crore provided for infrastructure development which accounts for over 46% of the total plan allocation.Allocation for road transport increased by over 13% from Rs. 17,520 to 19,834 crores.Rs 16,752 crore provided for Railways, which is about Rs.950 crore more than last year.
  • 28. Consumer sectorsDemand for colour TVs, refrigerators, washing machines ,LCDs etc is ever increasing. Increase in tax saving slab will decrease tax paying liabilities thereby further boosting up disposable income and ultimately consumer sector. All positives for this sector too.
  • 30. Power sectorThe budgetary allocation for the sector, excluding Rajiv Gandhi GrameenVidyutikaranYojana (RGGVY), has been raised to Rs 5,130 crore from Rs 2,230 crore. A clean energy cess of Rs 50 per tonne will be levied on domestic and imported coal.There will be a marginal pressure, though, on companies which sell power in the open market.Solar, small hydro and micro power projects at a cost of about Rs.500 crore to be set up in Ladakh region of Jammu and Kashmir.
  • 32. Steel IndustryThe most promising sector has shown faster than expected recovery from economic downturn. Increase in infrastructure and automobiles has increase its demand and supply scenario. Profitability of steel companies is expected to continue in coming years. So lot of positives for steel sector.
  • 34. Telecom sectorSubscriber base expected to increase but continuous fall in profits due to lowering tariff plans and increase in minimum alternate tax to 18% from 15% will negatively impact the profitability of telecom service providers. So negative impact on this sector.
  • 36. Oil and Gas sectorSubsidy on petroleum products will be disbursed as cash to oil marketing companies (OMCs). Increase in customs duty across crude oil and petroleum products would translate in higher duty protection for refiners. The resultant increase in refinery gate prices for retail auto and cooking fuels, if absorbed by OMCs, would translate in a rise of almost Rs 11,000-14,000 crore in under-recoveries in 2010-11.
  • 38. To develop and set up national gas grid.
  • 39. Tax incentives will be provided on capital expenditure on the laying and operating of cross country natural gas, crude or in pipe line networks for excise duty on naphtha reduced to 14%.OIL SECTOR
  • 40. Textile sectorsThe extension of 2% interest subvention on pre- and post-shipment export credit till March 31, 2011, will help small exporters reduce interest costs. The hike in excise duty on man-made fibres and yarns will increase polyester prices by Rs 1.50 to Rs 2 a kg, but the manufacturers will be able to pass the hike, as polyester continues to be cheaper than cotton. The government announced a one-time grant of Rs 200 crore to Tamil Nadu for the installation of a zero-discharge system to reduce environmental pollution at the Tirupur cluster. This will help knitwear exporters in the long term.
  • 42. Precious MetalOn gold and platinum from Rs.200 per 10 grams to Rs.300 per 10 grams .On silver from Rs.1,000 per kg to Rs.1,500 per kg .Basic customs on Rhodium - a precious metal used for polishing Jewellery reduced to 2 per cent .The excise duty on refined gold made from such ore or concentrate reduced from 8% to a specific duty of Rs.280 per 10 grams.
  • 44. Defence SectorAllocation for Defence increased to Rs. 1,47,344 crore including Rs 60,000 crore for Capital expenditure.About 2,000 youth to be recruited as constables in five Central Para Military Forces from Jammu and Kashmir in the year 2010.
  • 46. Rural sectorRs. 66,100 crore provided for Rural Development.Allocation for Mahatma Gandhi National Rural Employment Guarantee Scheme stepped up to Rs.40,100 crore in 2010-11.Unit cost under IndiraAwasYojana increased Rs.45,000 in the plain areas and to Rs.48,500 in the hilly areas.
  • 47. Contd. Allocation to Backward Region Grant Fund enhanced by 26 per cent from Rs.5,800 crore in 2009-10 to Rs 7,300 crore in 2010-11.Additional central assistance of Rs 1,200 crore provided for drought mitigation in the Bundelkhand region.An amount of Rs.48,000 crore allocated for rural infrastructure programmes under Bharat Nirman.
  • 49. Medical SectorUniform, concessional basic duty of 5 per cent, CVD of 4 per cent with full exemption from special additional duty prescribed on all medical equipments.Full exemption currently available to medical equipment and devices such as assistivedevices, rehabilitationaids etc.Specified inputs for the manufacture of orthopedic implants exempted from import duty.
  • 51. IT SectorThere have been no specific announcements made which should affect the IT sector directly but the UIDAI (Unique ID Authority of India) project has been approved and Rs. 1900 crores have been allocated to it. The project will most likely be handled by Indian IT companies so this should be good.Also, Rs. 31000 crores have been earmarked for school education reforms in 2010-2011; which will probably be a boost for the IT sector in the long term.
  • 53. ConclusionIncreased borrowing from the government will make the corporate difficult to borrow. As government increased expenditure in infrastructure, defence and other expenditure this will have indirect positive impact on the industries.Government push for rural development is going to see a new growth area opening up for the FMCG companies as their disposal income will increase .Companies working in the rural sector will definitely will be the prime beneficiary in the coming years.
  • 54. WE ASK OUR INVESTOR TO GO BACK TO THE ORIGINAL INDIA.THE RURAL INDIA.BOOM IN MAKING