Saturday, March 1, 2008

Sectors Favoured in budget

Automobile, healthcare, infrastructure, education and FMCG stocks are likely to gain from the budget proposals while fertilisers and metals will be at receiving end, said analysts.

Excise duty on small cars has been reduced to 12 per cent from 16 per cent, on hybrid cars to 14 per cent from 24 per cent, two-three wheelers to 12 per cent from 16 per cent. Duty on steel melting scrap and aluminium scrap from 5 per cent to nil. This is positive for the auto sector.

Excise duty cut will boost the demand for vehicles; nil duty on metal scrap will help reduce raw material prices, easing pressure on operating margins. Thrust on agriculture, infrastructure will help in increasing sales. Companies that have entered defence arena are likely to benefit further. Not only auto manufacturers but auto ancillaries are also likely to benefit further with cooling of raw material prices. BSE Auto Index closed 1.19 per cent up at 4,887. Ashok Leyland closed up 4.17 per cent, Maruti Suzuki gained 3.86 per cent, Bajaj Auto advanced 2.73 per cent, Hero Honda roe 2.29 per cent.

Shares of consumer goods companies like Hindustan Unilever rose 3.27 per cent on the budget proposal to do away with excise duty on packaged foods such as tea and coffee from 16 per cent now. Direction of the budget was to reduce inflation. So excise, direct tax rates were reduced. It would leave people with more spending power.

The Budget has been largely positive for the pharmaceutical sector. The long pending demand for cut in excise duty from 16 per cent to 8 per cent has been met. Customs duty reduction on certain life saving drugs to 5 per cent and total exemption from excise duty will benefit multinational companies like Glaxo, Aventis Pharma and Pfizer while the five-year tax holiday on hospitals is expected to propel Fortis Healthcare, Wockhardt Hospitals and Apollo Hospitals.

Shares of GlaxoSmithKline Pharma ended 4.52 per cent higher, Aventis gained 3.29 per cent, Pfizer rose 2.77 per cent, Fortis Healthcare climbed 7.44 per cent, Wockhardt advanced 1.31 per cent and Apollo Hospitals gained 1.27 per cent. Public sector banks would benefit from the finance minister's announcement that they would be reimbursed the Rs 60,000 crore loan waiver proposed in the budget for farmers holding 1-2 hectares of land.

PSU banks have the highest amount of bad debts arising due to higher lending to the agriculture sector. According to an analyst, Punjab National Bank will stand to gain as it has more exposure to agriculture lending at about 19 per cent of the total loans.

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