The Union Budget

Finance Minister Chidambaram presented the budget for 2007-08 to parliament today.

Highlights

The average inflation rate is seen at between 5.2% and 5.4 % in 2006/07 and the government is confident it can tackle the present inflationary trend. Revenue deficit remains at 2.1% and fiscal deficit is at 2% of GDP. Increase in gross tax revenue is by 19.9%. The minister also said all indicators point to an accelerating rate of investment. During the period between April 2006 and January 2007 foreign direct investment is estimated at $12.5 billion. Overseas investment exceeds portfolio investments. Government is to set up a panel to study the impact of forward trading in commodities. Exports are seen crossing Rs 5,53,260 crore, or $125 billion in 2006/07.

The budget does not hold any surprises to investors and is geared towards taming inflation and the increase in prices. There are no changes in the personal income tax slabs, rates; corporate income tax, central exercise, service tax rates and the other levies. Only the peak customs duties have been reduced by 2.5% on non-farm products to make the industrial inputs cheaper that is aimed at tempering with retail prices of consumer goods.

Investors are particularly dissatisfied with the increase in dividend distribution tax by 2.5% and bringing all knowledge-based companies under the minimum alternative tax, or MAT.

As a whole, the budget disapponts. There are no steps proposed to increasing productivity in agriculture, electricity and other sectors, which badly need investments and productivity improvement..

Trading highlights

Reliance was the most-active stocks with a turnover of Rs 325.25 crore followed by Reliance Communications and Infosys.

Advancers

ITC was the only gainer of the Sensex stocks, as it rose 4.03% to Rs 171.85, on the premise that it will be able to pass on the 5% hike in excise duty announced on cigarettes to customers. The Finance Minister P Chidambaram today announced a complete exemption of excise duty on all instant food mixes and biscuits, whose retail price does not exceed Rs 50 a kilo. ITC is not only the top cigarette maker, it also makes biscuits and ready-to-eat food. Relief from excise duty for biscuits and ready-to-eat foods will support for the company.

Decliners

Satyam Computers led the decliners, down 8.42% to Rs 412.5, Wipro lost 7.3% to Rs 560.9 were the most prominent decliners among the IT stocks. Index heavy Reliance Industries declined 3.65% to Rs 1,353.80 on a volume of 23.76 lakh shares. HDFC shed over 6% to Rs 1,502. Tata Steel and Maruti slipped around 5.5% each to Rs 443 and Rs 838, respectively.

Gujarat Ambuja Cements shed 7.8% to Rs 116, ACC dipped 6.4% to Rs 900. Other cement stocks also lost. Grasim tumbled over 5% to Rs 2,213. UltraTech Cement plunged nearly 6% to Rs 891, and Shree Cement dropped over 7% to Rs 1,147.


7:30AM Asia closes lower on Wednesday on weak performance from US market.
Asian markets closed lower on Wednesday. The Shanghai Composite Index rebounded 3.9%, adding 109.28 points to finish at 2,881.07 on Wednesday. On Tuesday, the Shanghai index plunged 8.8%. The drop followed fears that government would undertake measures to slow the fast-moving index. Premier Wen Jiabao tried to steady investor sentiment by issuing a comment through state press late Wednesday in order to allay the fears.

Other markets around the region plunged on the pooe performance by US markets overnight. Japanese Nikkei 225 stock index lost 515.80 points, or 2.9%, to 17,604.12. Australian stocks settled down 2.7% after shedding 3.5%, while Singapore Straits Times Index was off 3% to 3,136.58 points, after sagging 5.6% earlier. Philippine stocks nosedived 7.9%, their worst drop since 1997, at the height of the Asian financial crisis. Many Asian markets were in correction mode after their recent spectacular performance. Benchmark indexes in China, Australia and Singapore had all hit records in February. Before the plunge this week, Malaysian stocks had advanced 17% this year, while Philippine shares had climbed about 12%.


6:30AM European markets declined following global sell-off.
European markets were lower on Wednesday. By mid morning, Frankfurt Xetra Dax fell 1.6% to 6,712.13, the CAC 40 in Paris shed 1.7 % to 5,494.49 and London’s FTSE 100 slid 1.6% to 6,187.9. Of the emerging markets, Turkish Istanbul share index fell more than 3%, while Russian RTS index was off 2.7%.

Advancers