Which stocks to benefit from Union Budget 2011-12?

Swastika Investmart has come out with a report on Union Budget 2011-12.

Union Budget 2011-12:

Indian Finance Minister Mr. Pranab Mukherjee presented the budget for the year 2011- 12 with the focus on sustaining high Economic Growth, Strengthening Infrastructure, Addressing Inflation and giving a boost to the Farm Sector. With the Economy expanding the Government exuded confidence that the GDP Growth Rate during the next fiscal would exceed 8.75%.  Mukherjee also said the government aimed to reduce the fiscal deficit further, to 4.6% in the FY12.

OVERVIEW OF THE ECONOMY:

• GDP in FY11 estimated to have grown at 8.6% in real terms
• Continued high food prices have been principal concern this year.
• Monetary policy measures taken expected to further moderate inflation in coming months.
• Indian economy expected to grow at 8.75% to 9.25% in 2011-12.

SUSTAINING GROWTH:

Fiscal consolidation: Proposal to introduce the Public Debt Management Agency of India Bill in the next financial year.

Tax Reforms:Direct Taxes Code (DTC) to be finalized for enactment during 2011-12. DTC proposed to be effective from April 1, 2012.

Subsidies:

• Nutrient Based Subsidy (NBS) has improved the availability of fertilizer; Government actively considering extension of the NBS regime to cover urea.
• Government to move towards direct transfer of cash subsidy to people living below poverty line in a phased manner for better delivery of kerosene, LPG and fertilizers.

POSITIVE for ALL FERTILIZER STOCKS like RCF, NFL, MADRAS FERT and OIL MARKETING COMPANIES RELIANCE, IOC, BPCL

People`s Ownership of PSUs: Rs 40,000 crores to be raised through disinvestment in 2011-12. Government committed to retain at least 51% ownership and management control of the Central Public Sector Undertakings.

INVESTMENT ENVIRONMENT:

Foreign Direct Investment: Discussions underway to further liberalize the FDI policy.

Foreign Institutional Investors: SEBI registered mutual funds permitted to accept subscription from foreign investors who meet KYC requirements for equity schemes.

POSITIVE for NBFCs like RELCAPITAL, M&M FINANCIAL, BAJAJHLDNG, RELIGARE etc.

To enhance flow of funds to infrastructure sector, the FII limit for investment in corporate bonds issued in infrastructure sector being raised.

POSITIVE for PFC, REC, IDFC, JPASSOCIATE, GMRINFRA, LANCOINFRA

Financial Sector Legislative Initiatives: Amendments proposed to the Banking Regulation Act in the context of additional banking licences to private sector players.

POSITIVE for NBFCs like, RELCAPITAL, M&M FINANCIAL, RELIGARE etc.

Public Sector Bank Capitalisation: Rs 6,000 crores to be provided during 2011-12 to enable public sector banks to maintain a minimum of Tier I CRAR of 8%.

POSITIVE for PSU BANKS like, SBIN, DENABANK, VIJAYABANK, BANKINDIA, BOB, IOB etc.

Recapitalisation of Regional Rural Banks: Rs 500 crores to be provided to enable Regional Rural Banks to maintain a CRAR of at least 9% as on March 31, 2012.

POSITIVE for PUNJAB & SIND BANK

Micro Finance Institutions: India Microfinance Equity Fund of Rs 100 crores to be created with SIDBI. Women`s SHG`s Development Fund to be created with a corpus of Rs 500 crores.

POSITIVE for MICROFINANCE COMPANIES like SKSMICRO

Rural Infrastructure Development Fund: Corpus of Rural Infra Development Fund XVII to be raised from Rs 16,000 crores to Rs 18,000 crores.

POSITIVE for INFRASTRUCTURE SECTOR like JPASSOCIATE, GMRINFRA, LANCOINFRA

Micro Small and Medium Enterprises:

• Rs 5,000 crores to be provided to SIDBI for refinancing incremental lending by banks to these enterprises.
• Public sector banks to achieve a target of 15% as outstanding loans to minority communities under priority sector lending at the earliest.
• Rs 3,000 crores to be provided to NABARD to provide support to handloom weaver cooperative societies which have become financially unviable due to non-repayment of debt by handloom weavers facing economic stress.
• Public sector banks to achieve a target of 15% as outstanding loans to minority communities under priority sector lending at the earliest.

• Removal of production and distribution bottlenecks for items like fruits and vegetables, milk, meat, poultry and fish to be the focus of attention this year.
• Allocation under Rashtriya Krishi Vikas Yojana (RKVY) increased from ` 6,755 crores to ` 7,860 crores.

• In view of enhanced target for flow of agriculture credit, capital base of NABARD to be strengthened by ` 3,000 crores in phased manner.

• Rs 10,000 crores to be contributed to NABARD

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