New Delhi: Finance Minister Pranab Mukherjee played it safe in unveiling the federal budget on Friday, pledging reforms but setting only modest targets for trimming a ballooning fiscal deficit, disappointing investors.
The following sectors/companies will be hurt by the budget:
* Oil explorers such as ONGC, Oil India (OILI.NS) and Cairn India (CAIL.NS) will be hit after the budget proposed to raise cess on crude oil to 4,500 rupees per tonne from 2,500 rupees per tonne.
* Gold loans providers such as Muthoot Finance and Manappuram Finance Ltd (MNFL.NS) may see slower volume growth after basic customs duty on gold was doubled.
* Gold jewellery makers such as Gitanjali Gems and Titan Industries (TITN.NS) will also be hit due to high costs and as expensive jewellery will deter buyers hurting sales volume.
* Indian power equipment makers, who were demanding imposition of customs duty on imported power gear above 1,000 MW, are left high and dry by the finance minister as there was no mention of this demand in the budget.
* Government-owned financial institutions will get capital infusion of $3 billion which is largely seen as insufficient to capitalise state-run banks such as State Bank of India, Punjab National Bank (PNBK.NS), Bank of India (BOI.NS) and Bank of Baroda (BOB.NS). Indian banks will also be under pressure to achieve the target of 5.75 trillion rupees for farm credit, where bad loans are relatively higher.
* The budget was quiet on any reforms for Indian engineering exporters, which accounts for about one-fourth of the country's total merchandise exports. Companies such as Larsen & Toubro (LART.NS) and Punj Lloyd (PUJL.NS), were expecting measures to boost local manufacturing. Instead, the budget proposed to raise excise duty to 12 percent from 10 percent.
* The increase in excise duty, after the recent hike in the rail freight, would raise cement prices which is likely to hurt construction companies such as IVRCL Infra (IVRC.NS), Hindustan Construction (HCNS.NS) and can have adverse impact on the infrastructure.
* The increase in the service tax rate to 12 percent from 10 percent will raise the cost of production for developers such as DLF (DLF.NS), Oberoi Realty and Housing Development Infrastructure Ltd (HDIL.NS), who are already reeling under high input costs. This increased burden may be passed on to end users.
The following companies/sector will gain from the budget:
* Power utilities such as Tata Power, NTPC Ltd (NTPC.NS), Adani Power (ADAN.NS) and Reliance Power (RPOL.NS) are likely to benefit after the budget proposed a 2-year exemption on import duty for companies importing thermal coal. A proposal to allow external commercial borrowing to part finance rupee debt of power projects will also help.
* Low cost housing developers and financiers such as Sobha Developers (SOBH.NS), Housing Development Finance Corp (HDFC.NS) and LIC Housing Finance (LICH.NS) will benefit after the budget proposed allowing external commercial borrowings for low-cost housing projects below 2.5 million rupees.
* Carriers such as Kingfisher Airlines (KING.NS), Jet Airways (JET.NS) and SpiceJet (SPJT.BO) will benefit after the budget proposed to allow external commercial borrowings of up to $1 billion to help meet immediate funding needs. The finance minister also said that a proposal to allow foreign direct investment by airlines is under "active consideration."
* Infrastructure finance companies such as Infrastructure Development Finance Co (IDFC.NS), L&T Finance (LTFH.NS) and Rural Electrification Corp (RURL.NS) will benefit after the budget proposed to double the issue of tax-free bonds for financing infrastructure projects to 600 billion rupees.
* The budget was quiet on tax on diesel cars, as was widely feared by the market, nor was there a reduction in fuel subsidy. India also announced an increase in import taxes for assembled SUVs and utility vehicles costing more than $40,000. The move is seen as positive for car makers such as Maruti Suzuki (MRTI.NS), Tata Motors (TAMO.NS) and Mahindra & Mahindra (MAHM.NS).
* Retailers may benefit after the finance minister assured to arrive at a consensus to open up the supermarket sector to foreign giants such as Wal-Mart (WMT.N) and Carrefour (CARR.PA), which would help in tie-ups and boost capital inflows.
* Road developers such as IRB Infrastructure (IRBI.NS), Reliance Infrastructure (RLIN.NS) and Hindustan Construction (HCNS.NS) will see higher orders after the budget proposed to develop 8,800 kilometres of national highways under the National Highways Development Project in 2012/13.
* Cigarette maker ITC Ltd (ITC.NS) is likely to benefit after the government raised excise duty on non-cigarette tobacco products making the market competitive. Excise hike on cigarettes was lower than expected.
* Fertiliser makers such as Rashtriya Chemicals & Fertilizers (RSTC.NS), Chambal Fertilisers (CHMB.NS), Coromandel International (CORF.NS) and Tata Chemicals (TTCH.NS) could see a fall in expenditure after the budget fully exempted basic customs duty on import of equipment for 3 years.
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