BUDGET

🔵 KEY POSITIVES

* Fiscal deficit roadmap retained, 3.9% in FY16 and 3.5% in FY17. This has raised expectations of a rate cut from RBI, hence the rally in banking sector. FM mentioned in the context of IDBI that they could look at govt reducing its stake in PSU banks to below 51%. Needless to say this is being extrapolated to other PSU banks.

* ITC: excise duty increase on cigg is only 10%, lower side of the range which is good. No increase in tax on bidi, which is -ve. Overall not that bad for the company. They were anyway prepared for 8% hike in excise duty.

* Relaxation in FDI policy in Insurance, Pension, ARCs, Exchanges.

* Increase in outlay to Rural schemes and social infrastructure (Rs15000cr interest subvention to farmers + Rs38500cr allocation to MNREGA, highest ever).

* Increase in allocation on roads from Rs 400bn to Rs 550bn and including a further Rs 150bn from NHAI borrowings and Rs 270bn from Rural Roads Plan, the total spending on Roads to be Rs970bn

* No dividend distribution tax if SPVs give dividends to REITS and INVITS => +ve for DLFU/PEPL/IRB/SADE

* Voluntary Disclosure Scheme announced for black money.

* To introduce direct subsidy transfer for fertilizer subsidy.

* Tax benefits announced for 1st time home buyers and affordable housing.

* No increase in import duty on Crude is postive for Oil marketing companies (BPCL, HPCL, IOCL)

* Govt to introduce a comprehensive code for bankruptcy of financial cos

* Positive for Hindalco & Nalco as import duty hike on Aluminium from 5% to 7.5%

* Export duty on iron ore lumps reduced from 30% to Nil and Iron ore fines from 10% to 0%, but only for below 58% Fe content. This will be +ve only for Goa miners as rest of India FeOre content is higher. Mildly +ve for Vedanta (small part of the co. now). Doesn’t impact NMDC as it produces high quality ore.



🔵 KEY NEGATIVES

* PSU Banks recapitalisation lower at Rs 250bn.. Negative for PSU Banks.

* Hike in Securities Transaction Tax on Options trades by ~ 3x.

* No cut in Corporate Tax rate except for small cos & new units.

* Autos => Levy of Infra cess to extent of 1% on petrol cars & 2.5% on diesel & reduction in R&D exemption limits from 200% to 150%.

* ITC => Increase in excise duty on tobacco products increased by 10-15% and no hike in excise duty on 'Bidis'.

* COAL and Power cos => raises clean energy cess on coal from Rs 200/t to Rs 400/t, Coal India will pass on to power cos. Potential for a price hike goes down.

* No cuts in personal tax rates a negative for consumption theme.

* SUEL/INXW => accelerated depreciation for wind mills cut from 80% to 40%