Budget 2012-13: Sensex ends 210 pts down post Budget

The BSE Sensex dropped as much as 444 points from day's high of 17,871.00 amid huge volume on Friday, as a knee-jerk reaction to the Budget presented by the Finance Minister.

The BSE benchmark fell 209.65 points to end at 17,466.20, weighed down by 21 components. Meanwhile, the NSE benchmark fell 62.60 points or 1.16%, to close at 5,317.90.

The market was hugely disppointed as the Budget note was muted on most of the key factors like reforms and FDI. Displeased by the FM's non-action, most experts feel that Budget will be a forgotten matter soon and will follow global markets for liquidity.

Anil Singhvi, chairman of Ican Investment Advisors feels this is a highly inflationary Budget.

Uday Kotak, executive vice-chairman and managing director, Kotak Mahindra Bank finds Budget 2012 as a realistic one. He feels that Pranab Mukherjee has delivered a realistic Budget.

Indices

Today, all sectoral indices barring auto and FMCG ended in red. The BSE Oil & Gas, Capital Goods and Power indices butchered quite badly, falling 3% each. Healthcare, Metal and Bankex tumbled 2% each while FMCG Index was up nearly 2%.

Stocks In News

Shares of cigarette major ITC rose 3.65% after excise duty hiked by 10-15%, which was as per expected by the industry. While analysing, experts said there would be an increase of 15% for ITC while 10% for other cigarette manufacturer. The hike in excise duty on beedi and other tobacco products was quite positive for the ITC.

State-owned and country's largest lender SBI fell over 3% as sector analysts feel the recapitalisation amount proposed by the government is not enough. Government proposed Rs 15,888 crore for recapitalisation of public sector banks in FY13. PNB and Bank of Baroda tanked 3-3.7%. Private sector lender ICICI Bank was down 1.4% while rival HDFC Bank fell 0.6%.

State-owned ONGC and Oil India were down 4-4.7% after cess on crude oil increased to Rs 4,500 per mn tonne from Rs 2,500. Private sector companies Cairn India was down 6% and Reliance Industries slipped 3%.

The government has now implemented Alternative Minimum Tax (AMT) for partnership firms as well. This would impact stocks like Cadila (down 5.3%) and Sun Pharma (down 7%) as they would have to pay 18.5% MAT on book profits earned for the fiscal year. This would increase their tax outgo.

State-run BHEL tumbled 3.5% as industry analysts were expecting import duty on power equipment, which did not happen. Engineering and construction major L&T dropped over 3%.

Aviation stocks too were under pressure as there no announcement on FDI. Jet Airways was down 3% and SpiceJet lost 6.6% while Kingfisher was down 0.7%. Pantaloon Retail slipped 3% as there was no clarity on FDI in multi brand retail.

Educomp Solutions and Edserv Softsystems tanked 4-6%.

Standard Chartered IDR shot up 20% amid heavy volumes post the Finance Minister proposed 2-way fungibility of IDR (Indian Depositary Receipt) in his Union Budget 2012-13. According to investopedia.com, fungibility means - cross-listed stocks are considered fungible because it doesn't matter if you purchased a share of XYZ stock in its home country or in a foreign country; it should be accepted at either location as XYZ stock.

Why was the market disappointed?

Overall three events of this month namely RBI's monetary policy review, LTRO 2 and Budget could not provide power to cross new 52-week high on the Nifty, but technical experts have a sigh of relief as it retained the 5300 level.

The market had lot of expectations like 19% hike in custom duty on power equipment, more spending on education, FDI (foreign direct investment) in aviation, clarity on FDI in multi brand retail, fuel subsidy, food security bill etc, but non of these events were on the agenda of the Finance Minister.

Even experts are worried over GDP growth target of 7.6% (which was also on expected lines) because the market did not get any indication of lowering interest rates even in April, though it is a month away event from now. The Reserve Bank of India has been trying to maintain liquidity but the industry needs a rate cut as the capital expenditure cycle has been stalled in last two years.

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