>UNION BUDGET ANALYSIS 2009-2010 (RELIANCE MONEY)

PROGRESSIVE AAM ADMI BUDGET

The Union Budget for FY2009-10 announced by Finance Minister Pranab Mukherjee has turned out to be more of a common mans budget with the core focus being the continuation of efforts to achieve a 9% GDP growth in future while aiming at all round inclusive growth as well as social spending. More specifically this Budget like the earlier ones, has continued to focus on the basic pillars of all round development which include a strong push being given to the Agriculture sector with the overall outlay being increased to Rs 325,000 crs from Rs 2,87,0000 crs last year, followed by a continuedfocus on the social sector by encouraging public spending on programs for increased capital outlays on Rural Employment, Drinking Water and Mid day meal Schemes, providing primary education via higher budget allocations and increased thrust on the Bharat Nirman programme during FY2009-10.

MARKET EXPECTATIONS HOWEVER REMAINED UNFULFILLED
The market which was keen awaiting wide ranging announcements ranging from a expected cut in the STT, a cut in Capital gains taxes, and also some big bang announcements on PSU divestments was disappointed that nothing of these actually materialized in the budget. In fact on the negative side MAT rate has been increased to 15% from 10% with some minor benefits like FBT being taken off and individual tax payers also given the benefits of surcharge of 10% being taken away in this budget. Nevertheless corporate tax rates have remained unchanged which is a sliver lining considering the tight financial resource crunch with the government.

TECHNICAL VIEW POST 'BUDGET 2009-10
NIFTY scaled a HIGH of 4693.20 on 12th JUNE 2009. Since then till the presentation of the Uniion Budget markets exhibited a CAUTIOUS approach, without any significant directional move. Markets went into today's Budget with High hopes on Disinvestment programme, aggressive Reforms and Market friendly announcements. But 'build-up' of positions was clearly absent in pre-budget action. The expectations of markets were not met in today's 'socially oriented' budget. Absence of big ticket announcements sent a wave of 'disappointment' among players. The result was a sharp knee-jerk reaction from marketmen. FIIs were seen off-loading aggressively, showing concerns on rising 'fiscal deficit'.

Technically speaking 'Support' around 4150 levels of NIFTY is crucial and the 'Risk' in markets will go up substantially if NIFTY slips below the mentioned levels (on closing basis) during the week. Next significant support for NIFTY exists far lower around levels of 3800. We however believe that despite the market disappointment over the budget, the probability of emergence of 'value Buying' at lower levels from domestic Institutions is very High.

CONCLUSION
Net Net we believe the Union Budget for 2009-10 has been on expected lines notwithstanding the fact that several big bang announcements related to FDI, Pension Reforms, Education Reforms, Insurance and PSU divestment were eagerly awaited but failed to prominently come up in this budget.

As mentioned earlier the primary focus of the government has been to accelerate growth in Infrastructure, ensure all inclusive growth by increasing social spending on several employment generation schemes and ensuring that export oriented sectors are given a helping hand by way of some fiscal concessions until the global economy picks up. While the markets seem to have given a thumbs down to this budget we believe that the Union Budget is not the only the conclusive document which is a means to the end and many more pro market policy announcements from the government on specific business areas is expected to materialize over the next 12-18 months. We hence believe that long term investors should utilize this market opportunity optimally by selectively investing in blue chips for a medium to long term horizon.

SEE INSIDE THE REPORT FOR DETAIL ON

TAX PROPOSALS

• Direct Tax
• Indirect Tax

CUSTOMS DUTY

• Excise duty
• Service tax

SECTOR IMPACT ANALYSIS ON

• Automobiles
• FMCG
• Infrastructure
• Education
• Information Technology
• Media & Entertainment
• Metals
• Pharmaceuticals

To see full report: BUDGET ANALYSIS