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Union Budget 2010: Winners and losers

Posted: Feb 26, 2010 at 1826 hrs IST Mumbai India needs to review public spending and
improve its fiscal position, Finance Minister Pranab Mukherjee said on Friday, kicking-
off the presentation of his budget for the fiscal year that starts on April... Full Article at
Expressindia.com

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MUMBAI: India needs to review public spending and improve its fiscal position, Finance

Minister Pranab Mukherjee said on Friday, kicking-off the

presentation of his budget for the fiscal year that starts on April 1.
Following are the major sectors that are likely to gain or lose from the proposals of the
budget:

WINNERS: Construction and engineering companies such as Larsen & Toubro, GMR
Infrastructure, Jaiprakash Associates and Gammon Infra on proposal to invest Rs 1.73
trillion ($7.4 billion) on infrastructure in 2010/11.

The capital good index was up 1.8 per cent by 0804 GMT, in line with the rise in the
broader market.

Real estate firms such as DLF, Unitech and Sobha Developers after the budget proposed
to give developers tax deductions on existing projects and relaxed norms for built-up
area. The sector index was up 4.8 per cent.

Drugmakers such as Dr Reddy's Laboratories, Cipla and Biocon after weighted deduction
on in-house research and development expenses was proposed to be raised to 200 per
cent from 150 per cent now.

Hospitality services providers such as Indian Hotels, EIH and Taj GVK Hotels on
proposal to allow firms setting up new two-star and above hotels to claim investment-
linked tax deduction.

State-run bank shares such as State Bank of India, Andhra Bank, Canara Bank and Bank
of India on proposal to provide 165 billion rupees ($3.6 billion) for recapitalisation. The
sector index was up 3.3 per cent.

Education service providers Educomp Solutions, NIIT Ltd and Aptech after the budget
increased allocation to the education sector to 1.38 trillion rupees in the union budget.

LOSERS: Outsourcers such as Infosys Technologies, Tata Consultancy Services and

Wipro on no mention of extension of a tax holiday scheme for software firms in the
budget speech. The tax break ends in March 2011. The sector index was flat in a firm
market.
Cigarette makers such as ITC Ltd after the budget proposed to raise excise duty on
tobacco products. Shares in ITC were down 3.6 per cent, after having fallen as much as 4
per cent earlier.

"Control over fiscal deficit comes more from containing expenditure. Even more
commendable is making the deficit more transparent by not issuing oil or fertiliser
bonds," Rao said.
Between 6 January 2010 and 19 February 2010, Indian markets have been highly volatile for a
variety of reasons. There were fears of Indian government ending the stimulus package; sovereign debt
problems in Europe; concerns that rising food inflation would force the Indian central bank to push up rates;
China’s surprise move to restrict bank lending to cool its economy; and the US Federal Reserve’s surprise
move to increase the discount rate. During this period, the Sensex plunged 9% (down almost 1,500 points).
But how have the Moneylife sectors suffered in this decline?

Out of the 49 sectors, sugar, the hot sector of late 2009, was the worst performer, crashing 22% whereas
printing & publishing was down 21%. Indian government’s move to reduce sugar stock holding limit from 15
days to 10 days for bulk users has triggered a wave of selling in sugar stocks. Also, India needs to urgently
import 3-5 million tonnes of white sugar due to tighter supply situation than previous estimates. This has
weighed on market sentiments, mainly due to the stronger dollar which is expected to impact margins of the
sugar companies.

ML Real Estate sector suffered after the central bank increased the cash reserve ratio by 75 basis points at
its quarterly policy review. The sector declined 19% in the above period. Telecom and Office Equipments
sectors plunged 13% each.

Telecom sector declined on back of index heavyweight Bharti Airtel’s massive slump following the
company’s expensive bid to take over the African assets of Kuwaiti telecom player Zain for $10.70 billion.

Airlines, Energy and Hotels were the next worst-performing sectors as they declined 12%, 11% and 10%,
respectively.

Among the best performers was Farm & Farm Inputs (up 10%), gaining massively after the Indian
government eased controls on several fertilisers and raised prices of the popular urea nutrient by 10%. This
move has now raised hopes of more reforms and lower subsidies in the Union Budget 2010-11 resulting in
higher margins for fertiliser producers. Among the other sectors that bucked the downtrend were Healthcare
and Paints which were up 2% each.