Budget 2012-13: Marginally negative for market, says Bonanza

By Rakesh Goel, Sr VP, Bonanza Portfolio

Nifty opened on a cautious, yet slightly positive note on the much anticipated Budget day. The positive overseas cues from the US market helped in raising market sentiments as Nifty inched higher in the morning session, ahead of the budget announcements. As expected, market turned highly volatile as Finance Minister Pranab Mukherjee made his Budget announcements.
Nifty touched the intraday high of 5445.65 as the minister announced that GDP is estimated to grow by 6.9% in 2011-12, after having grown at 8.4% in preceding two years, but economic indicators are suggesting that economy is turning around as core sectors and manufacturing are showing signs of recovery. Expectation of slightly higher GDP growth in FY2012-13 at 7.6% plus or minus 0.25%, was taken positively by the market.
However, the rally proved to be short-lived as further announcements were made regarding financial markets and direct tax proposals. Finance Minister raised the exemption limits on individual tax payers by just Rs 20,000 from existing Rs 1,80,000 to Rs 2,00,000, disappointing the tax payers of the country.
An uptick was seen in the market as Minister announced reduction in STT (Security Transaction Tax), however the mood turned somber once again after it was perceived to be too little. Budget proposed reduction in securities transaction tax by 20% on cash delivery transactions only. Nifty slipped into red on adverse sentiments.
As further announcements were made, Nifty see sawed between positive and negative territory, eventually slipping down amid bearish sentiments. The relief given in the budget was perceived as too little against the additional burden on the pocket of the taxpayers. The upward revision in tax slabs though will provide some benefit to individuals, but the 20% increase in service tax (increased from 10% to 12% and on almost all the services except those in the negative list) will likely lead to no gain for the individuals.
In a further hit, Budget also proposed to increase the standard rate of excise duty to be from 10% to 12% with excise duty on large cars also proposed to be enhanced. Investment in Gold jewellery also stands to get costlier with the levy of excise duty of 1% on branded precious metal jewellery to be extended to include unbranded jewellery as well.
Nifty continued to slip downwards during the afternoon session, just managing to stay above the 5300 levels. Nifty made the intraday low of 5305.80 during the fag end of the trading session, ending the day with over 1.2% losses.