Budget reaction from Mr. Varun Goel, Head Equity PMS - Karvy Private Wealth

Budget for FY13 came in on expected lines

The fiscal deficit number has been penciled at 5.1% for FY13. The provisions for fuel and fertilizer subsidies look inadequate and the fiscal deficit number would be closer to 5.5% in absence of meaningful hikes in auto fuel prices. The government borrowing programme at 4.79 lakh crore is quite high and would result in further hardening of bond yields.

Government's focus clearly has been to shore up the revenue side with increase in Indirect tax rates. We were expecting a slight increase in Service tax and excise duty which happened with the rate changing from 10% to 12%. The sectors which primarily will take the hit are from this will be automobiles, FMCG, tourism & cements. The government has expanded the service tax coverage by having a 'negative List' for service tax with all but 17 services becoming applicable for service tax. No timelines have been given for implementation of Direct tax code and Goods and services tax (GST).

On the expenditure side, government has provided for Food subsidy of 75,000 crores and is looking to implement Food security bill in select 50 districts. The allowances for various other entitlement programmes have not been increased very meaningfully.

There was a lot of talk on boosting infrastructure activity but no concrete provisions have come in. A positive step for the power sector was abolishment of 5% import duty on Coal. This move will be positive for most of the power generating companies.

As far as the market is concerned, budget is a non-event. The market will start focusing on Q4 FY12 earnings which start from 10th April and RBI policy in the third week of April.

Source : Equity Bulls

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