The day after the big b-day rally, markets gave up some of the gains
as expected. The initial euphoria died as many analysts came out with more
sober opinions on the budget. The 'devil in the details' came out overnight
and yesterday's big winners in banking, and oil and gas sectors took a beating.
There
was all round dissatisfaction about the reduction in depreciation benefits
for plant and machinery as well as the move to tax fringe benefits at the
hands of the employer. These two steps are widely perceived to take away the
benefits of reduction in corporate tax rates. Foreign brokerages CLSA and
Merrill Lynch came out with post-budget outlooks which were less than enthusiastic.
Both
maintained their general outlook on the economy and the markets but complained
about the lost opportunity for grand measures and absence of disinvestment
plans. Citigroup maintained the growth target for the coming year at 7.5 per
cent. Rating agency Fitch, retained the country's sovereign and foreign exchange
rating while expressing some disappointment on the budget and fiscal targets.
Standard & Poor's (See: Fiscal
deficit a worrying factor: Standard & Poor's) also expressed disappointment
over the fiscal condition. The
Sensex closed at 6651, down 63 points and the Nifty at 2084, down 19 points.
Nifty futures closed at a discount to the spot index. US
markets remained weak yesterday on firm oil prices. Indian ADR's were a mixed
bag. ADR's of HDFC Bank, ICICI Bank, Tata Motors and Wipro ended with gains
while Infosys, Satyam and VSNL closed in the red. RBI
came out with the detailed banking roadmap as promised by the finance minister
in his budget speech. The roadmap is more in line with the conservative views
expressed earlier by the RBI governor than the more liberal views by the finance
ministry. The overriding principle seems to be achieving a well diversified
ownership structure for banks. Shareholding by a foreign bank in an Indian
bank is limited to 5 per cent. Foreign banks can set up fully owned subsidiaries
and can expand the existing branch network. Corporate houses will be allowed
to own up to 10 per cent in Indian banks. SBI indicated at more acquisitions,
both overseas and domestic, while expressing disappointment in not increasing
FII investment limits. Bank stocks lost most of yesterday's gains. ICICI Bank
lost close to 3 per cent, SBI lost 3 per cent and HDFC Bank lost close to
2 per cent. IT
stocks were the major losers with heavyweights Infosys, TCS and Wipro ending
deep in the red. Satyam lost 4 per cent and the second rung IT players also
lost ground. The proposed tax on fringe benefits to employees is perceived
as a big negative for the IT companies as they are the most liberal in handing
out employee benefits. Indianoil
was a big loser, losing more than 4 per cent after the company came out with
figure of more than Rs. 6,000 crores as subsidy burden for the next year.
The company anticipates that gains in crude duty cuts will be offset by losses
in refining margins. Other oil marketing stocks HPCL and BPCL also lost ground
while crude producer and yesterday's loser ONGC gained. Standalone refiners
Kochi Refineries and Chennai Petroleum also lost ground. Auto
stocks were in the news following the release of February sales data. Maruti
turned in a disappointing performance with only 3 per cent volume growth yoy
and sales of the bread and butter 800 model dropping by more than 40 per cent.
The stock lost more than 2 per cent. Two wheeler biggies Hero Honda and Bajaj
posted impressive volume growth, with the latter making substantial gains
in the motorcycle segment. FMCG
majors ITC, HLL and P&G all gained on expectations of a demand pickup
after reduction in personal income tax rates. ITC gained more than 3 per cent
and HLL went up by more than 1 per cent. Tyre companies continued their uptrend
after the cut in excise duties. Construction majors L&T and Gammon India
notched up significant gains while metal stocks ended weak. Sugar
stocks gave up most of the gains made yesterday after the market realized
that the sugar package would benefit the mills in the co-operative sector
more. The increase in excise duty on molasses is a negative for the sugar
sector. Textile stocks clocked substantial gains on the back of positive budget
announcements for the sector. Asian
markets traded positive today, the exceptions being Hong Kong and Malaysia.
European markets were firm in opening trades. US markets would take some cues
from oil prices. While a correction was anticipated and is healthy after a
big rally, the weakness towards the close may be an indicator of a lackluster
market tomorrow. Markets can be expected to remain steady with a downward
bias over the rest of the week. A buildup in the F&O segment or substantial
inflows could affect this outlook.
*Disclaimer:
The author does not have any position in the stocks specifically mentioned
above at the time of writing this article. This analysis / report is only
for the purpose of information and is not an investment advice. Readers are
advised to consult a certified financial advisor before taking any investment
decisions. While efforts have been made to ensure the accuracy of the information
provided in the content the author or publisher shall not be held responsible
for any loss caused to any person whatsoever. Other
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