ITC Jumps As Govt Refrains From Raising Excise Duty On Cigarettes.

The key benchmark indices edged higher in choppy trade, extending gains for the second day in a row, as investors digested various proposals in the Union Budget for 2011-2012. The BSE 30-share Sensex was provisionally up 131.21 points or 0.74%, off close to 465 points from the day's high, up close to 115 points from the day's low. The favorable announcements in the Budget were lower fiscal deficit target set by the government for the year ending March 2012, a lower-than-expected net borrowing programme, a thrust on infrastructure and agricultural sectors, reduction in surcharge on corporate tax and permission for foreign investors to invest in mutual fund schemes. Among the unfavourable announcements were increase in social sector spending and a plan to bring food security bill which could strait government's finances going ahead. A slight increase in minimum alternate tax (MAT) also unnerved some.

The market breadth was positive. The BSE Sensex closed below the psychological 18,000 mark, having crossed that mark in intraday trade. Cigarette major ITC surged as there was no increase in excise duty on cigarettes in the Budget. Index heavyweight Reliance Industries (RIL) reversed initial gains on increase in MAT to 18.5% of book profit from 18% earlier. Most auto stocks fell in volatile trade on fuel price hike worries after the Finance Minister ignored calls for a duty revision on oil products to mitigate the impact of spurt in global crude oil prices that have touched a two year highs. But, car major Maruti Suzuki jumped. Cement stocks fell after the finance minister proposed to replace the existing excise duty rate with composite rates having an ad valorem and specific component with some rationalization. Metal stocks were mixed.

Shares of public sector undertakings (PSUs) were in limelight after Finance Minister Pranab Mukherjee said that the government is planning to raise Rs. 40,000 crore from disinvestment programme in 2011-12. PSU OMCs rose as government will provide Rs. 20,000 crore ($4.4 billion) cash subsidy to state-run oil retailers for selling fuel at below market rates in 2011-12.

Intraday volatility on the bourses was high. The market surged in early trade before the Budget. The market extended gains as the finance minister began to unveil the budget spending measures. The market pared gains later. Stocks regained strength again. The market pared gains to hit fresh intraday lows in early afternoon trade. The market once again gained strength in afternoon trade. The market pares gains in mid-afternoon trade. The market came further off highs in late trade. It gained some strength at the fag end of the trade.

The Finance minister announced a cut surcharge on corporate tax on domestic firms to 5% from 7.5% and projected a lower fiscal deficit target of 4.6% for the year ending March 2012 (FY 2012). He said while growth in 2010-11 has been broad-based, food inflation continues to remain a concern. Mukherjee also put emphasis on increasing agricultural productivity to curb food inflation. He added that financial sector reforms will move forward with the Insurance amendment Bill, LIC bill and Pension Development Authority Bill in current session.

The Finance Minister said Goods and Services Tax (GST) bill will be introduced in this session of parliament and that the new Direct Tax Code will be implemented from 1 April 2012. The Finance Minister allowed foreign institutional investors (FIIs) to invest in mutual fund schemes and raised limit the FII investment limit in corporate bonds for investment in infrastructure. He said government will introduce Public Debt Management Bill in 2012.

Mukherjee said Indian economy is back to pre-crisis growth trajectory and that economy is set for double-digit growth in coming years. He said government expects average inflation to be down next year. He added current account deficit poses a concern.

The government will spend Rs. 1.6 lakh crore on social projects, up 17% from the last year. The finance minister said the government is on course to introduce the food security bill this year. The new Companies Bill will also be introduced he added. He said the economy is resilient to the external shocks. He said removal of supply bottlenecks in the food sector will be in focus in 2011-12.

The finance minister also proposed the issuance of tax-free bonds worth Rs. 30,000 crore for infrastructure financing. Mukherjee said the government intends to spend Rs. 2.14 lakh crore as budgetary support for the infrastructure sector in 2011-12 and will set up an infra debt fund to promote foreign investment in the sector.

The finance minister raised tax exemption limit on personal tax to Rs. 1.8 lakh from Rs. 1.6 lakh. For senior citizens, tax exemption limit has increased to Rs. 2.5 lakh from Rs. 2.4 lakh and the eligibility age for senior citizens will be 60 years against 65 years earlier. The Rs. 20000 exemption for investment in infra bonds has been raised by another year.

The projected fiscal deficit for FY 2011 has been revised downwards to 5.1% from 5.5%. The fiscal deficit for FY 2012 has been projected at 4.6%. The projected fiscal deficit for FY 2013 is 4.1%.

The service tax is retained at 10% while standard rate of Central Excise has been retained at 10% by the finance minister. There is no change in peak customs duty rate.

The latest economic data showed the the gross domestic product (GDP) growth for the third quarter stood at 8.2% in Q3 December 2010 against 8.9% in Q2 September 2010.

As per provisional figures, the BSE 30-share Sensex was up 131.21 points or 0.74% to 17,832.12. The index gained 595.62 points at the day's high of 18,296.53 in mid-afternoon trade. The Sensex rose 17.97 points at the day's low of 17,718.88 in early afternoon trade.

The S&P CNX Nifty was up 30.65 points or 0.58% to 5,334.20 as per provisional figures.

The market breadth, indicating the health of the market, was positive. On BSE, 1,599 shares advanced while 1220 shares declined. A total of 101 shares remained unchanged.

From the 30 share Sensex pack, 17 rose and the rest fell.

BSE clocked turnover of Rs. 4060 crore higher than Rs. 3492.49 crore on Friday, 25 February 2011.

Index heavyweight Reliance Industries (RIL) fell 0.1% to Rs. 964.95, off the day's high of Rs. 994 after finance minister increased minimum alternate tax by 50 basis points. The Reliance Group is reportedly in talks with Japan's Orix Corp to acquire the latter's 23.87% stake in unlisted Infrastructure Leasing and Financial Services for around $1.2 billion.

Reliance Infrastructure slumped 4.46% and was the top loser from the Sensex pack after no major announcement was made in the budget for the power sector.

PSU OMCs rose as government will provide Rs. 20,000 crore ($4.4 billion) cash subsidy to state-run oil retailers for selling fuel at below market rates in FY 2012. BPCL, HPCL and Indian Oil Corporation rose by between 1.96% to 3.05%.

Shares of public sector undertakings (PSUs) rose after the finance minister said that the government is planning to raise Rs. 40,000 crore from disinvestment programme in 2011-12. State Trading Corporation (STC) India, HMT and Dredging Corporation gained by between 1.7% to 2.96%.

India's largest tractor and utility vehicles maker by sales Mahindra & Mahindra surged 3.19% to Rs. 614.10, off the day's high of Rs. 642.70 after government today proposed to set up a National Mission for Hybrid and Electric Vehicles to encourage manufacturing and selling of alternative fuel-based vehicles. M&M has controlling stake in electric car maker Reva.

The Budget for 2011-12 also proposed to cut excise duty on development and manufacturing of hybrid vehicle kits to 5% from the existing 10%, besides fully exempting customs and counter-vailing duty (CVD) on import of special hybrid parts.

Car maker Maruti Suzuki India also rose 4.8%. But, other most other auto stocks fell in volatile trade on fuel price hike worries after the Finance Minister ignored calls for a duty revision on oil products to mitigate the impact of spurt in global crude oil prices that have touched a two year highs. Ashok Leyland, Tata Motors, Hero Honda Motors and Bajaj Auto shed by between 0.53% to 2.36%.

The finance minister kept excise duty unchanged in the Budget 2011-12. Marketmen had forecast an excise duty hike of up to 2% in this Budget.

Cement stocks fell after the finance minister proposed to replace the existing excise duty rate with composite rates having an ad valorem and specific component with some rationalization.. ACC, Ambuja Cements, Ultratech Cements and Jaiprakash Associates fell by between 2.21% to 4.31%.

The finance minister proposed to reduce the basic customs duty on two critical raw materials for cement industry viz. petcoke and gypsum to 2.5% from 5%.

Metal stocks were mixed. National Aluminum Company, Tata Steel, steel Authority of India and Jindal Saw declined by between 0.34% to 2.95%. Sterlite Industries, JSW Steel, Hindalco Inustries and Hindustan Zinc rose by between 0.23% to 2.38%.

Index heavyweight Infosys fell 0.17% as government did not extend tax exemption for software technology parks under Section 10 A/10 B which is due to expire in March 2011.

Coal India (CIL) jumped 12.42% after company said its board at a meeting held on 25 February 2011 approved revision of the coal prices effective today, 28 February 2011. Due to the revision of coal prices, CIL would generate an approximate additional revenue of Rs. 650 crore in the financial year ending March 2011 (FY 11) and Rs. 6200 crore in the financial year ending March 2012 (FY 12).

Source : indiainfoline.com