Sectors and cos that look attractive over the long term

ET Intelligence Group wades through the gobbledygook of the latest Union Budget to bring you the sectors and scrips that look promising over the long term. These are the sectors that will be most likely benefited by the government's initiative to encourage expenditure on infrastructure and consumption in the country on a long term basis.

Agriculture:


Proposal

The recent budget provides for 13% growth in agricultural credit in FY10, an extension to the interest subvention scheme, and sizeable increase in allocations for the Accelerated Irrigation Benefit Programme. Budget allocations have also been substantially increased towards the National Rural Employment Guarantee Act and the six schemes under Bharat Nirman.

Impact

Higher liquidity in the hands of Indian farmers will benefit companies providing direct or indirect inputs to the agriculture industry such as seeds, fertiliser, agrochemicals or pumps and pipes for irrigation, warehousing infrastructure and transportation.

Top Picks
Advanta, Rallis, Tata Chemicals, Chambal Fertilisers and Jain Irrigation, Aries Agro and Sabero Organics.

FMCG:

Proposal

The government has increased its allocated expenditures on many rural deveplopment schemes leading to more money in the hands of rural consumer. Despite the central excise duty rate having increased to 8%, the government has maintained the excise duty rate on food items, items of mass consumption like pressure cookers, cheaper electric bulbs, low-priced footwear, and water filters/purifiers, CFL, etc at 4%.

Impact

The FMCG sector, which is much dependant on the consumption demand, does have a reason to smile from this budget. Increase in income means more money in the hands of the have nots. This will mean more new customers for the companies in the sector.

Top Picks:
Hindustan Unilever, ITC, Nestle, Dabur, Eveready Industries, Emami, Jyothy Laboratories, K S Oils, Relaxo Footwear and Cera Sanitary.

Auto:

Proposal

Higher investment in rural areas and infrastructure sector will open growth avenues for the automakers. Expansion of the scope and extent of the projects under National Rural Employment Gurantee Act (NREGA), higher fertiliser subsidies and enactment of national food security bill put more money in the hands of rural households and induce investment in the farm sector. Automakers will also gain from the Budget propsal to extend tax deduction for R&D expenses.

Impact

The proposals will expand demand for LCVs, two-wheers and entry-level cars. They may also benefit heavy and medium commercial vehicles.

Top Picks
Tata Motors, Hero Honda, Maruti Suzuki and Mahindra & Mahindra.

Power and Infrastructure:

Proposal

The budget aims to raise infrastructure investment to nearly 9% of the GDP by 2014. In the current budget, the allocation for Highways was up by 23% while that for railways has nearly doubled. The allocation for rural electrification programme is up by 30% while Jawaharlal Nehru Urban Renewal Mission programme is set to double. The government is also readying the blue print for a National Gas Grid.

Impact

The companies in infrastructure construction and capital goods sector are likely to grow and bag new orders. Though there could be some realignment in the relative growth between the some segments of the sectors.

Top Picks
BHEL, L&T, Kalindee Rail Nirman, Patel Engineering, Cromption Greaves, KEC International, GAIL, BEML Ahluwalia Contracts, Subhash Projects, Pratibha Industries, Genus Power.

Healthcare:

Proposal

The government has increased allocation towards healthcare schemes like National Rural Health Mission and Rashtriya Swasthya Bima Yojana (RSBY). It has also brought down the cost of drugs, pharmaceuticals and medical equipment by keeping their excise duty at 4%. The cost of certain life-saving drugs and life saving devices has been reduced by curtailing their customs duty and exempting them from excise duty and countervailing duty.

Impact

These measures, although not providing any immediate or ostensible benefit to the sector, are going to pave way for increased expenditure towards heathcare reforms.

Top Picks
Cipla, Glaxosmithkline Pharma, Piramal Heathcare, Cadila Heathcare and Indoco Remedies, Elder Pharma, Zydus Wellness.

Education:

Proposal

The access to education is expected to increase manifold. The Budget proposes to open a central university in all the uncovered states in the country. This is on the top of the government programme to cover the entire nation with new IITs and IIMs and National Institute of Technology. Besides, the government constitutes to expand and deepen the school education through Sarva Shiksha Abhiyan.

Impact

The move will open up new growth avenues for companies providing e-learning solutions, education software and post-college or vocational training courses. More students also mean greater demand for books, stationeries and other reading materials.

Top Picks
Educomp, NIIT, Navneet Publications, BILT, West Coast Paper, Core Projects.

Metal and Cement:

Proposal

The budget proposes a big step-up in public investment in transport infrastructure, power, gas, housing and urban infrastructure. The government is also focusing on rural developments in a big-way. Budget also aims for slum-free cities in next five years.

Impact

For most infrastructure projects cement and steel are must have inputs. Infact there can't be any construction without using a minimum quantity of cement and steel. A rise in rural income will in general push-up per capita consumption of steel in India which is around one-tenth of developed countries. It's the same in case of cement and other metals. Public investment in housing will spur demand for sanitary ware, tiles and home accessories.

Top Picks
SAIL, JSW Steel, ACC, Ultratech, Shree Cement, Madras Cement, HSIL, Cera Sanitaryware, Nitco.

Telecom:
Impact

In spite of a strong growth, telecom sector in India has not penetrated much into the rural India till now. As per a TRAI (Telecom Regulatory Authority of India) report, the rural teledensity at around 10-11% is almost one-seventh of urban teledensity in India.

Currently, the urban circles are highly crowded with the presence of at least 5-6 operators in a circle and penetration level as high as 90%.

This leaves little scope for future growth in these regions. This is why most of the companies are increasing their focus on rural areas and small towns. For instance, Bharti Airtel, the largest mobile operator in the country, recently announced the formation of a seperate business unit related to rural business. Others are also expected to follow the suit. A portion of the increased per capita income of rural consumers will be diverted towards communication related activities. The cheap handsets alongwith lower tariff rates make it compelling for rural population to use more and more of mobile telephony.

Top Picks
Bharti Airtel, Reliance Communications, Idea Cellular and Nu Tek.

United Phosphorous: In every long-term investor's portfolio

United Phosphorous

One-year beta 0.78
Institutional holding 55.61%
Current dividend yield 1.0%
Current P/E 13.5
Current m-cap Rs 6555.9 cr
Current market price Rs 149.15

United Phosphorous (UPL), with its wide product portfolio and worldwide presence, appears well placed to benefit from a boom in agriculture over the next few years. Long-term investors should consider including this evergreen stock to their portfolio.

Business:

Incorporated in 1969, United Phosphorous today is among top five generic agrochemicals manufacturers in the world. It has 23 manufacturing sites (nine in India, four in France, two in Spain, one each in UK, Vietnam, Argentina, Netherlands, Italy, Colombia and China) with a customer base spread across 86 countries. The company manufactures a wide spectrum of generic agrochemicals and specialty chemicals.

During FY09, the company derived 22% of its sales from North America, 21% from India, 32% from Europe and 25% from other countries, with all the regions reporting double-digit growth.

It has a wide domestic and global distribution network for the sale of its products worldwide and boasts of the largest agrochemical product portfolio in India. The company carried out a series of big-ticket buyouts during FY05 and FY08 to expand its geographical reach and product portfolio.

In November 2004, it bought US-based AG Value for $36 million, followed by Spanish company Cequisa and Indian Shaw Wallace Agrochemicals in Jun 05. In Nov 05 it bought Argentinean Reposo and Dutch seed manufacturer Advanta in Feb 06. Acquisition of South African Crop Serve was followed by French company Cerexagri in Nov 06. The Argentina-based ICONA in July 07 and Colombia-based Evofarms in Feb 08 were its recent most acquisitions. UPL has also purchased various agrochemical products from a number of global leaders such as Bayer, Dow Agrosciences and Du Pont.

Growth Drivers:

After several years of aggressive inorganic growth, UPL has settled into consolidation. In FY09, the company didn’t make any significant buy-outs and is not likely to go in for one in FY10 either. At a time when the growth in demand for food has outstripped the growth in supply, the pressure on agriculture has increased to improve farm yields the world over.

Higher commodity prices have also resulted in higher liquidity in the hands of farmers, increasing their ability to invest in agriculture. This augurs well for the global agrochemicals industry, which after several years of single digit growth, witnessed over 10% of real growth in FY09. In fact, the global economic slowdown is unlikely to take a toll on agriculture.

United Phosphorous, with a wide product portfolio and expansive geographical reach, is well placed to benefit in this scenario. The company has a healthy track record of sales and profit growth, while maintaining strong operating margins over the past five years. The company has been regularly introducing new products to its various markets and has earmarked a capex of Rs 300 crore for FY10 on plant expansions and new product registrations.

Financials:

During the FY09, UPL reported a 37% spurt in its net sales to Rs 4,802 crore, out of which 8% was from rupee depreciation, 15% due to higher prices and 14% due to an increase in quantity.

The company’s borrowing in FY09 increased by Rs 504 crore to Rs 2,073 crore as on March 31, 2009 mainly due to loans given to group company Advanta, repricing of forex loans and rise in working capital. To fund its inorganic growth, the company had raised $225 million through the issue of FCCBs in FY05 and FY07. Of these, FCCBs worth $157.1 million have been converted into equity shares and $67.9 million are outstanding.

Valuation:

At the current market price of Rs 149.15, the scrip is trading at 13.5 times its earnings for the year ended March 2009. We expect the company to end FY10 with an EPS of Rs 13.1, which discounts the current price by 11.4 times. Its peers like Bayer Crop science and Rallis India are currently trading at P/E of 11-13.

Kesoram Industries: One of the cheapest cement stocks

Beta 0.8
Institutional holding 32.8%
Dividend Yield 2.1%
P/E 3.2
M-Cap Rs 1228.4 cr
CMP Rs 268.5

Kesoram Industries, the flagship company of the BK Birla Group, is a diversified player with a presence in cement and tyres. Octogenarian industrialist BK Birla had recently willed this company to his grandson, Kumar Mangalam Birla. Kesoram has benefited from the boom in the cement industry over the past three years, which helped the company offset the slump in profits of its tyre division. It is now set to emerge as one of country’s leading tyre makers. The company is currently one of the cheapest stocks in its category and may be re-rated as the management control passes on to the Aditya Birla Group, India’s third largest business house.

Business:

Kesoram Industries’ installed cement capacity at end of FY09 was 5.3 million tonnes, with plants in Karnataka and Andhra Pradesh. In addition, the company has recently brought on stream an additional 1.6 million tonne cement capacity. This additional capacity is expected to help the company’s net sales jump by Rs 500 crore in FY10. The tyre division’s capacity was at 37.1 lakh units at the end of FY09, with plants in Orissa and Uttarakhand.

The company’s viscose filament rayon yarn capacity is at 6,500 tonne at the end of March 2009. The cement division contributed nearly 48% to the company’s topline in FY09, while tyres accounted for 45.5%. The company is currently setting up a tyre plant to cater to the twowheeler sector at Uttarakhand with a capacity of 78 lakh tyres per annum and capex of nearly Rs 190 crore.

Expansion plans:

The company is planning a further expansion plan of nearly Rs 1,550 crore, which would entail the addition of 1.65 million tonnes cement capacity in Karnataka, with a capex of nearly Rs 750 crore. Also, the company plans to invest Rs 800 crore for expansion of its tyre business. Post-expansion, Kesoram is set to emerge as one of the top three tyre makers in the country.

This expansion plan will be financed by a mixture of internal accruals and debt. During FY09, Kesoram’s cash flow from operations was to the tune of Rs 370 crore. Against this, cash used for investment activities was a little over Rs 1,034 crore. The company’s debt-equity ratio had risen to 1.46 at the end of FY09, slightly higher than the previous year. However, with Kesoram’s comfortable cash flow and expected turnaround in the tyre business, the leverage ratio is expected to either remain stable or decline over the next two to three years.

Financials:

In the March 2009 quarter, the company’s net sales grew 26.1% to Rs 1,108 crore, but its operating profit margin declined due to higher operating costs, especially in the tyre business.

Valuations:

At Rs 268.55 Kesoram trades at a discount to its book value and just 3.2 times it’s FY 09 earning per share. This is lower than valuations enjoyed by diversified companies like Orient Paper, Century Textile and Birla Corp among others.

Consumer durables co V-guard promises value in coming years

Beta 0.35

Institutional holding 4.42%

Dividend Yield 3.72%

P/E 11.56

M-Cap Rs 200.40 cr

CMP Rs 67.15

V-guard is a Kerala-based consumer durables company that manufacturers and markets a range of electronic and electrical products. Founded in 1977, the company started as a voltage stabiliser manufacturer and has since then diversified into new segments in the consumer durables category.

Business:

The company has maintained its dominance in the electric voltage stabiliser market while expanding its offerings in segments such as wiring cables, power and control cables, water pumps and motors, electric and solar water heaters, electric fans and uninterruptible power supply (UPS) systems for PCs and homes. V-guard follows a unique production module where it focuses on production of two of its products — electric cables and solar water heaters — and passes on the rest to anumber of small-scale industries (SSI) for manufacture. Scattered all over the country, these SSIs are actively assisted by the company in terms of R&D and production technology.

While the company has a prominent presence in the south with nearly 93% of its sales in 2008-09 from the region, it is expanding its operations in the north: the contribution of sales from the region has increased to 7% of the total sales in the last two years. V-guard’s marketing and distribution network consists of 161 distributors and 146 service centres while its products are available in nearly 8,000 retail showrooms. V-guard has also entered the business of amusement parks with Viga land, an amusement park located near Cochin.

Growth Drivers:

A growing economy will see higher capital expenditure in infrastructure, power and irrigation sectors, which will directly benefit electric cable, stabiliser and pump industries. Since V-guard is a dominant player in these markets, a big chunk of the demand is expected to go to the company.

A sustained dominance in the south Indian market has encouraged V-guard to strengthen its presence in the north: while the region accounts for only 7% of the total sales, the company plans to increase it to 12% of the topline in the next two years. The company also expects to benefit from the solar water heater market which is expanding fast. It serves both the domestic and commercial segments with a range of 23 models of solar heaters.

Financials:

In last four financial years, net sales as well as net profit have increased at a compounded annual growth rate (CAGR) of about 23% and operating profit has expanded at a CAGR of 18% during the period. For the period FY05-FY 08, the company’s cash profits grew at a compounded rate of 79%. As on March 31, 2009, the company has a total debt of nearly Rs 26 crore and its total debt-toequity ratio is 0.21. While the cash balance has declined from Rs 38.56 crore in 2007-08 to Rs 4 crore at the end of 2008-09 , the decline has been in line with the increase in fixed assets.

Valuations:

Due to a lower Beta, against a fall of 50% in the m-cap of Sensex, V-guard lost about 38% of its m-cap in 2008. At the current market price, the P/E is closer to its value at the start of the stock’s listing in the secondary market and higher than its average of 7 for the period. The share can be bought on dips as the wide product portfolio of the company and its consistent growth model makes it a rewarding buy in the consumer durables segment.

Outlookprofit - Profit trading ideas

How to deal with volatile Sensex

Go defensive. That's the mantra chanted by pundits these days as they grapple with the waywardness of the market. They are advocating a slew of measures to their clients: Hedge one's portfolio through derivatives, get into the defensive sectors like pharma and FMCG, invest in gold. However, most investment experts believe such strategies are best left to institutions and retail investors shouldn't try to follow market fads and lose an opportunity to make money.

‘‘It is extremely difficult to take a call on the future course of the market due to uncertainties in the global economy. Even situation in the domestic economy looks fluid after the Budget. Government's huge borrowing programme, scanty monsoon... There are many uncertainties . That is why we have been telling our clients to adopt a defensive investment strategy,'' says a wealth manager who doesn't want to be identified. ‘‘ We have been telling our clients to get into defensive sectors like pharma and FMCG. We are also asking people to invest in gold as it is a perfect hedging mechanism against uncertainties in the economy,'' he adds.

However, investment experts believe that though such a strategy makes perfect sense, retail investors shouldn't pay any heed to market fads which come in vogue from time to time. ‘‘ People think of defensive strategies when they can't take a call on the future course of the market. But I would advise individual investors not to get caught up with such theories,'' says Amit Trivedi, a financial trainer. ‘‘ These kind of strategies are suited for large institutions. Retail investors should concentrate on making money. If they change their investment strategy very often depending on market conditions, they would lose opportunities to make money,'' says Gul Tekchandani, an investment expert.

Both of them believe that individual investors don't have the wherewithal or time to monitor the market on a daily basis and take remedial measures. ‘‘ Individual investors should concentrate on their occupation, as that is where they earn their wealth from. The investment is just a complimentary process and they should keep their investment strategy very simple,'' says Trivedi. ‘‘ A large institution will have the resources to monitor the investment climate continuously . But most individuals won't have the capacity to do it. Individuals can only react to a news. That is why they are reactive and rather than proactive,'' he adds.

Trivedi suggests that individuals should always try to diversify their portfolio so that they are not at the mercy of any one particular sector. ‘‘ It is a simple strategy that would work for individuals ,'' he says. ‘‘ Only the classic strategy of buy and hold would work in this market . There are many opportunities and investors should use the correction in the market to buy quality stocks and hold them,'' says Tekchandani.

Top 100 things to do in Bombay

1. Get high on qawwali at Haji Ali
2. Spot a celebrity at Juhu PVR
3. Sit down on the steps of Asiatic Society library
4. Crane your neck to see the Bombay Stock Exchange building
5. Spot a leopard in IIT Bombay campus. If you can’t, then settle for an IITian girl
6. Enjoy a play in Prithvi Theatre
7. Enjoy the NCPA in a play or opera
8. Find some calm around the Banganga tank
9. Haggle for non-antiques in Chor Bazaar
10. Face the high tide on Worli seaface
11. Bet money on race horses at the Royal Western India Turf Club, Mahalaxmi
12. Dangle your feet, lean back on your palms and enjoy the sea from the Marine Drive promenade
13. Go for a heritage walk in the Naval Dockyard (first Sunday every month, Indian nationals only)
14. Explore the Sanjay Gandhi national park. A national park in city limits? Oh yeah!
15. Soak in the Victoria Terminus
16. Watch DDLJ at Maratha Mandir
17. Party at Hard Rock Cafe and mourn for a minute the death of mills around Parel
18. Jog on Juhu beach
19. Sit on a tetropod at Nariman Point in midnight till police constables shoo you away
20. Stand still on flyover bridge at Dadar station and watch the crowd whiz by you
21. Find out who is grittier. You or Crawford market?
22. Find the Fort wall
23. Ride the Victoria on Marine Drive. Yeah, cheesy, we know
24. Discover the city’s Jewish connection at Keneseth Eliyahoo Synagogue
25. Watch sunset over Aksa beach in Madh Island
26. Discover the underbelly of Bombay in Dharavi
27. Stay for a night at Taj Mahal Palace hotel. You definitely want to tick off this luxury address for the oh-I-stayed-there-for-a-while conversations, don’t you?
28. Catch the national madness of cricket in Oval Maidan
29. Read a Bombay book (Suketu Mehta’s Maximum City?) in Azaad Maidan
30. Cheer a football match at Cooperage ground
31. Bury your nose in books for hours at Strand
32. Stroll in Bombay University
33. Climb the airport wall in Kurla to gain phenomenal views of Boeings
34. Swoon at a concert in Bandra Kurla complex
35. Gaze at the Queen’s Necklace from the Hanging Gardens at dusk
36. Hunt for antique furniture (real or fake?) in Oshiwara
37. Hike up the Mazgaon Hill
38. Buy books from roadsides around Flora Fountain
39. Envy the private palaces of Malabar Hill
40. Party on a ferry in the Arabian Sea off Gateway of India
41. Take a break from the city. Vasai offers the ramparts of Bassein fort, ruins of Portugese churches and East Indian food
42. Trek in Sahayadris
43. Say hello to the fauna at Byculla zoo
44. Buy a camera from D N Road’s gray market
45. Dare the red light district of Kamatipura
46. Guess what RFID system they use to tag clothes at the Dhobi Ghat
47. Take a power nap at David Sassoon Library
48. Catch movies at art-deco cinemas: Regal (1933), Eros (1938), Metro (1938)
49. Bow your head before city’s famous deities: Mumbadevi, Mahalaxmi, Walkeshwar, Siddhivinayak, Iskcon
50. Dine where Shahrukh Khans and Ness Wadias dine: Olive, Indigo
51. Feel the sufi mysticism at dargahs of Haji Ali and Maqdoom Ali Mahimi
52. Shop at the Bandra boutiques or if they are too expensive, give Hill Road or Fashion Street a shot
53. Gape at famous residences: Shahrukh Khan’s Mannat, Amitabh Bachhan’s Jalsa
54. Discover theatre scene in the city at venues other than Prithvi and NCPA: Sophia Bhabha Hall, Breach Candy; St Andrews, Bandra W; Rangsharda Auditorium, Bandra W; Ravindra Natya Mandir Hall, Prabhadevi; Gadkari Rangayatan, Thane W; Shivaji Mandir; Bhartiya Vidhya Bhavan, Chaupaati; Tejpal Hall, Grant Road
55. Explore the Powai and Vihar lakes
56. Visit the museums: Prince of Wales, Monetary, Modern Art, Mani Bhavan
57. Admire the British era architecture in Fort: Churchgate station, Western Railway headquarters, High Court, General Post Office, Telegraph Office, Police Headquarters
58. Learn about the rock-cut architecture: Elephanta, Kanheri, Mahakali and Karla caves
59. Explore the churches: Gloria Church, Byculla, Portugese; Mt Mary Church, Bandra W, Portugese, 1640; St Michaels Church, Mahim, 1565, rebuilt 1973; St Thomas Cathedral, Flora Fountain, 1718; Wodehouse Church, Colaba, 20th century; Afghan Church, Navy Nagar, Colaba, 1858; Our Lady of Salvation Church, Dadar W, Portugese, 19th century; St John Baptist, Seepz, 1579; St Peter’s Church, Bandra, 1852, rebuilt 1938; St Andrew’s Church, Bandra, Portugese, 1575
60. Check out an art exhibition: Jehangir Art Gallery, Fort; Tao Art Gallery, Worli; Piramal Art Gallery, Nariman Point
61. Buy fish at Sassoon Docks, Cuffe Parade or Dockyard Road, Mazgaon
62. Find the forts of Bombay: Bombay Castle, Fort; Castella de Aguada, Bandra; Madh Fort, Versova; Mahim Fort, Mahim; Sion Fort, Sion; Sewri Fort, Sewri; Worli Fort, Worli
63. Buy a vintage bollywood poster in Mini Market or Lamington Road
64. Getaway to the beaches around Bombay: Alibag, Kashid, Murud, Nagaon
65. Travel to places overnight: Goa, Ajanta Ellora, Mahabaleshwar, Pune, Khandala and Lonavala
66. Discover the charm of marble tabletops, bentwood chairs and irani chai at Parsi cafes
67. Catch behind the scenes action at a Bollywood studio
68. Loft the ball for a six in your neighborhood ‘galli’ cricket but make sure you don’t break any window panes
69. Silently stare at the Towers of Silence and Agiaries
70. Shadow the dabbawalas for one full day
71. Walk through a koliwada
72. Ride a vintage lift in a 100 year old building
73. Travel in a local train. How about the Virar Fast?
74. Ride a double decker bus. Isn’t Bombay the only city where they still run them?
75. If you have made it to a penthouse in Bombay, you might as well enjoy the view
76. Drink cutting chai, eat vada pav
77. Gorge on late night sandwiches in Juhu
78. Sip some wine at an expensive seaside restaurant: Vie Lounge, Juhu; Dome, Intercontinental, Marine Drive; Aurus, Juhu; Salt Water Grill, Girgaum Chaupaati; Bayview Bar, Nariman Point
79. Figure what all the fuss is about having a beer in Mondegar or Leopold
80. Jack you car bonnet using a cold-drink bottle and eat kebabs at Bade Miyan in Taj’s back alley
81. Savour a fine authentic meal of East Indian cuisine at Anant Ashram in Kotichawadi
82. Eat a Gujrati-Marwari thali at Friends Union Joshi club in Kalbadevi
83. Smoke a hookah at roof-top restaurant Koyla in the Arab quarters of Colaba
84. Eat South Indian fare in Matunga
85. Eat pav bhaji, pani puri, bhel puri, sev puri at Girgaum Chaupaati
86. Chew a paan outside Shoppers Stop, Bandra W
87. Indulge yourself with fruity flavors of Naturals ice cream. And if it’s summer, try a cup of alfonso mangoes with malai ice cream
88. Learn out the art of ordering tea in a streetside cafe. “Ek paani kum dena.”
89. Drink Kingfisher, Cobra or Zingaro in your neighborhood look-alike bar of Nightlovers
90. Try the green chilli ice cream at Bachelorrs
91. Swing to some live music as you enjoy your continental meal at Not Just Jazz By The Bay. Do pay attention to the witty hoarding outside as you leave the place
92. Run the Bombay Marathon (Jan)
93. Enjoy the Kala Ghoda arts festival (Feb)
94. Cheer ‘Mumbai Indians’ in an IPL cricket match at Wankhede statdium (May-Jun)
95. Get drenched to the bone while biking in the monsoons (Jul-Sep)
96. Sing “Govinda aala re aala” as 40 feet high human pyramids take the prized matka (Aug-Sep)
97. Get lost in the crowds of Ganesh Chaturthi (Sep)
98. Watch thousands of pink flamingos in the mangroves at Sewri (Nov-May)
99. Eat nihari, kebabs and sweetmeats around Masjid on the eve of Eid (Ramzan)
100. Run a ‘free hug’ campaign. This is Bombay, meri jaan!

It's time for retail investors to enter the market

Even as the bloodbath played out on the Street late last year, there were two events that investors, the Street, companies and the global business community - in fact, just about everyone who's been tracking the big India story - was waiting for. The formation of the new government and subsequently the Budget.

And while the election results did not disappoint - and fired up the Sensex by about 50%, the impact of the big defining event - the Budget - has been exactly the opposite. Not only did the Sensex fall by 9.5% in only five days, the smooth upward movement witnessed post the June 16 election results, saw a complete reversal. The signals obviously are mixed and confusing and investors are not sure about the way forward with their portfolios. Reason why we at SundayET decided to try and decode the signs for you with our signature event - The SundayET CEO Roundtable on Personal Finance. We have always tried to keep our reader - the investor - on the cutting edge of financial planning. And this time it was no different.

Our experts, drawn from banking, insurance, asset management, securities and tax planning, included S K Goel, chairman & MD, UCO Bank, Krishnamurthy Vijayan, executive chairman, JP Morgan Asset Management India, D K Aggarwal, MD, SMC Wealth and Rajesh Sud, CEO & MD, Max New York Life Insurance. Moderating the discussion was Amitabh Singh, tax partner, Ernst & Young India.

The main takeaway was simple, how should you - the investor - adapt your portfolio according to the market sentiment. What unfolded through the discussions were guidelines on wealth creation, wealth management and now, even more important, wealth resurrection. The question was how to preserve what you already have and keep it moving till the market comes back.The gurus put their heads together in trying to map out the road ahead. And here's their verdict - you, the investor, are good to go. Retail investors, who want to bet their bucks on the Indian equity market post-Budget, should no longer wait for that big-ticket event, instead it's time to enter the market, but for the long haul. And here's what they all agreed on - the right asset allocation is critical for a successful investor who maximises profits and stays on top during any market tumble. Exactly timing the market is tough even for the savviest of investors. So it's next best to go contrary and buy now when others are still shying away from the equity market.


Some of the points that came up during the discussion included the issue of rebalancing portfolios, the sectors to stay tuned into, better tax planning and the insurance vs mutual fund debate. Here all panellists advised retail investors to approach professionals as the equity market still remained tough to crack. We have not missed the bus yet. There are many stocks which are still cheap. If the market goes down from here on, buy more,” Mr Aggarwal from SMC Wealth added.And even for risk-averse investors who like to stay away from volatile equity markets, there were a few takeaways.Mr Goel of UCO Bank predicted at least a 200-basis point fall of the fixed deposit rates in the near future, which means that those who still go for fixed deposits in banks could look forward to higher returns than those who postpone their investment decisions.Mr Sud of Max New York Life felt that conservatism was still useful and while leveraging was a great strategy, but over-leveraging was not.On the tax front, Mr Singh of E&Y, felt that those in service needed to be more savvy to get more bang out of their bucks.For JP Morgan’s Mr Vijayan, there are positives on both the domestic consumption and the infrastructure growth fronts. “I feel there’s no need for mutual fund investors to dramatically change their asset allocation. With the hope that government expenditure will trigger growth, the equity strategy of investors is likely to go in the same direction,” he said.

Overall, pin-stripe suits and optimism blended well together and that’s surely music to the ears of Indian investors.

Top 10 Foreign Investors in India

Mauritius is heading the list of top 10 Foreign Investors in India with Rs.313 Billion with US lagging behind in the second position at Rs.99 Billion. See the graph below:

FIIs invest Rs 3,500 cr in equities since Budget

Foreign institutional investors (FIIs) have made a net investment of Rs 3,500 crore in the Indian stock markets since the presentation of the Budget in Parliament on July 6, even as the benchmark index Sensex lost over nine per cent in the same period. An analysis of FIIs activity in the domestic markets shows that overseas investors were the net purchaser of Indian stocks worth Rs 3,499.5 crore during the last week.
FIIs were the gross buyer of shares worth Rs 17,092.1 crore during the week, while they sold equities valued at Rs 13,592.6 crore, resulting in a net inflow of Rs 3,499.5 crore, as per the data available with the Securities and Exchange Board of India (SEBI).

Significantly, during the past week, the Bombay Stock Exchange's benchmark index Sensex -- composed of 30 bluechip stocks -- dropped 9.44 per cent to end at 13,584.22 points. On the Budget day, FIIs booked profit and sold shares worth Rs 351.3 crore, dragging the benchmark indices in the negative zone. The SEBI compiles the trade data one day late.On July 6, the day Finance Minister Pranab Mukherjee presented general Budget in the lower house of Parliament, Sensex suffered the biggest fall on any Budget day and in the year too by plunging over 870 points on concerns of high fiscal deficit.

Mukherjee said the fiscal deficit may rise to 6.8 per cent of gross domestic product in the year 2009-10, the highest since 1994.In five trading sessions from July 6 to July 10, FIIs were the net seller for three sessions, while, for other days they remained net purchaser.During the week, the foreign investors also put in money worth Rs 2,984.9 crore in the debt market segment, while so far this year, FIIs are the net seller of Rs 1,356.10 crore in debt instruments.

Top 10 firms lose over Rs 1.73 lakh crore in market valuation

The country's top 10 firms saw their total market capitalisation being wiped out by over Rs 1,73,000 crore last week, and Mukesh Ambani-led Reliance Industries Ltd lost the most.

RIL lost Rs 38,935 crore in market valuation, with its market cap dipping below Rs three-trillion mark to Rs 2,79,897 crore during the week ended July 10, 2009, as against Rs 3,18,832 crore in the previous week.

Shares of the company on Friday ended 12.21 per cent lower at the BSE to close at Rs 1,778.40.

The total market cap of the top 10 firms, comprising four private and six state-run companies, fell Rs 1,73,462 crore at Rs 14,31,433 crore last week as against Rs 16,04,896 crore the previous week.

State-run firms Oil and Natural Gas Corporation Limited (ONGC) and National Thermal Power Corporation (NTPC) together lost Rs 40,872 crore in market cap.

The total market valuation of ONGC stood at Rs 2,10,967 crore and NTPC at Rs 1,59,344 crore on Friday.

Telecom services provider Bharti Airtel lost Rs 6,635 crore in market cap but moved up one place to fourth position on the top ten list. Minerals and Metals Trading Corporation of India slipped to fifth position from fourth after losing Rs 21,181 crore.

Market cap of Airtel stood at Rs 1,48,509 crore and of MMTC at Rs 1,36,384 crore.

Mining major National Mining Development Corporation (NMDC) lost Rs 20,398 crore from its market cap to end the week at Rs 1,22,549.

Further, IT bellwether Infosys Technologies jumped to seventh place from ninth, though it lost Rs 4,264 crore while State Bank of India slipped to eight slot from seventh after losing Rs 16,954 crore.

During the week, Infosys beat forecast with better-than-expected 17.28 per cent growth in net profit at Rs 1,527 crore compared to a year earlier period. The company ended the week with a market cap of Rs 98,939 crore.

Bharat Heavy Electricals Ltd slipped to ninth position from eight after losing Rs 9,663 crore from its market valuation and engineering major Larsen & Toubro (L&T) lost Rs 14,560 crore. The market cap of BHEL and L&T stood at Rs 97,153 crore and Rs 79,692 crore respectively.

The new top ten list has RIL at the top followed by ONGC (Rs 2,10,967 crore), NTPC (Rs 1,59,344 crore), Bharti Airtel (Rs 1,48,509 crore), MMTC (Rs 1,36,384 crore), NMDC (Rs 1,22,549 crore), Infosys (Rs 98,939 crore), SBI (Rs 98,000 crore), BHEL (Rs 97,153 crore) and L&T (Rs 79,692crore).

Fits, Then Starts

OLM Market Pointers

• Buy good FMCG stocks; growth and earnings expectations on these will now be revised upwards
  
• Infrastructure and utility companies serving the rural sector will benefit from the budget
  
• Global cues are more important now; expectations are that markets would cool off by September
  
• Don’t buy companies looking to raise funds, as debt is likely to get costlier

For all the noise generated about the "exaggerated" response of the stockmarkets to Budget ’09, it’s rather reassuring that they have a very short memory span. One moment is still crystal clear, though: when the Union finance minister spelled out the fiscal deficit, all the pre-budget euphoria drained out like a punctured balloon. Was this reaction justified, particularly when it was clear that most analysts and macro-economic experts had already resigned themselves to the deficit being 6.2 per cent of the GDP as announced in the interim budget?

Anyway, for the markets, it is important that the event of the budget is now in the past. Most market participants agree that the run-up to the budget was unwarranted, and it’s now time to reassess valuations. "We believe that the markets have overreacted, and we maintain our positive stance on the market. We raise our April 2010 Sensex target to 18,000 from 15,000," observes financial markets research group Macquarie Research. Interestingly, foreign institutional investors have been sellers in the market since the announcement of the budget, but domestic institutional investors have been using these dips to buy.

For the broader markets, however, the cues will now come from beyond Indian shores. Unemployment rates in the US are showing that the signs of recovery seen earlier are now only "brown weeds". Global volatility is going to continue and with an uncertain monsoon, Indian markets are likely to see a further slide. "We see this fall in markets as a short-term phenomenon and the focus will now shift to more fundamental factors like earnings growth and the near-term phenomenon of the monsoon," says Narayan S.A., managing director, Kotak Securities.

Select companies in the corporate sector will see a negative impact on their results on account of the increased minimum alternate tax (MAT). The impact on infrastructure companies is positive. The IT sector gets another year of tax reprieve. Companies that service rural consumers are also expected to benefit. "Increased allocations for the National Rural Employment Guarantee Scheme and the Bharat Nirman scheme will boost rural disposable incomes," says broking firm Motilal Oswal. Indeed, the FMCG companies left out of the rally earlier are now becoming favourites in the portfolio realignments that have begun. In fact, on budget day, the FMCG index was the only one in the green, moving up nearly one per cent. Sectoral calls are the order of the day.

And then, there’s always the hope that things will get better.The fiscal deficit figure can surprise positively, if the disinvestment process picks up steam in the current fiscal. Or if rapid economic growth leads to an increase in tax collections, compared to the budgeted flat receipts. But that, as they say, is another story for another trading day.

Post-Budget rally shows 47 market survivors

The five-day-long onslaught of the post-Budget wealth erosion for equity investors saw only 47 stocks of BSE 500 index bucking the trend. In fact, these handful of companies, largely from FMCG, cement and auto sector, generated a wealth of Rs 16,942 crore against an overall erosion of about Rs 201,261 crore for the Sensex, a SundayET analysis reveals.

Stocks such as Tube Investments of India, ITC and Marico gained by 11%, 10% and 9% respectively in the post-budget rally against a decline of 9% shown by the Sensex during the same period. Tube Investments of India is the second largest bicycle manufacturer of the country and a beneficiary of increasing income of people living in rural areas.

Significantly, all those 47 stocks were laggards in the rally that started in March, 2009, as they gained only 46% till the last trading session before the Budget, whereas the other set of 453 stocks in BSE-500 gained as high as 80%. The gains by this companies, most of which have a huge rural presence, could be attributed to the generous budgetary allocation to the rural sector. The allocation to the National Rural Employment Guarantee Act (NREGA) increased by 144% to Rs 39,100 crore. Also, Rs 2,000 crore has been allocated to the Rural Housing Fund.

Stocks such as Tube Investments of India, ITC and Marico gained by 11%, 10% and 9% respectively in the post-budget rally against a decline of 9% shown by the Sensex during the same period. Tube Investments of India is the second largest bicycle manufacturer of the country and a beneficiary of increasing income of people living in rural areas.

Significantly, all those 47 stocks were laggards in the rally that started in March, 2009, as they gained only 46% till the last trading session before the Budget, whereas the other set of 453 stocks in BSE-500 gained as high as 80%. The gains by this companies, most of which have a huge rural presence, could be attributed to the generous budgetary allocation to the rural sector. The allocation to the National Rural Employment Guarantee Act (NREGA) increased by 144% to Rs 39,100 crore. Also, Rs 2,000 crore has been allocated to the Rural Housing Fund.

Allocation towards rural road scheme has gone up by 60%. Bharat Nirman also saw 45% more allocation. Irrigation programmes are also going to get higher allocation. According to Amitabh Chakraborty, president equity at Religare Securities, the Budget was positive for rural India, and also for the agriculture sector. Tax benefits such as 100% deduction on capital expenditure in warehousing and cold chain facilities, have improved the investors’ sentiments for the FMCG sector.

Another sector that saw an upturn in the post budget rally is cement. Major cement companies such as Ambuja Cements and Ultratech Cement gained 6% and 3%, respectively in the last five trading session only. According to Mr Chakraborty, the government seems to have shifted its focus on rural housing and infrastructure construction. Also, the investment towards the Commonwealth Games went up to Rs 3,472 crore, which would create more demand for cement. Auto majors too are not far behind.

Hero Honda Motors and Maruti Suzuki India gained around 5% each. Hero Honda and Maruti Suzuki gained as they have huge presence in the rural areas. Hero Honda Motors enjoys almost 40% of the rural two-wheeler market. Similarly, there is a huge demand of smaller cars in the rural areas and Maruti Suzuki is the largest player in this segment.

The major losers, significantly, were in the education sector, which made an impressive gain in the pre-Budget rally. Companies such as NIIT, Aptech and Educomp Solutions lost around 27%, 21% and 16% respectively. According to Mr Chakraborty, however, there is a huge potential in the education sector but companies, which are going to be benefited are not many in the listed space. The government’s focus is expected to be mainly on the primary education space. I V Subramaniam, CIO at Quantum Advisors, believes that the education sector did not perform post-Budget mainly due to lack of any major announcement in the finance bill.

Infrastructure stocks, which sold like hot cakes in the March rally also did not remain favourites of investors in the post budget rally. Larsen & Toubro, Simplex Infrastructures, Reliance Infrastructure and GMR Infrastructure were all down by 11-20%.

Beware! All's not well with Indian stocks

The Indian stock markets may have gained significantly in recent months, but the country's fiscal position and uncertainty over global recovery still suggest a cautious approach towards equities, says Moody's .

Despite the surge in stock markets in the recent months, which has been met with jubilation by investors, some cautiousness still remains as the rally has come amid the continuing risks to both the global and India economy, research firm Moody's Economy.com said in report.

"With global recovery prospects uncertain, these are further reasons to be cautious about Indian equity prices," it said, adding "excess capacity, slowly recovering external demand and relatively high long-term interest rates will drag on investment".

The Indian economy is facing several challenges with an already-stretched fiscal position limiting the government's ability to provide further stimulus, while weighing on government bond prices.

Further, despite having a strong majority in Parliament, the government would need the political will to cut popular subsidies and modernise labour laws.

Although, India's downturn has bottomed and was mild compared with other countries but the stock market still tend to take their direction from the United States stock market movements, it added. "It is hard to envisage a sustained divergence in direction, even though emerging markets can amplify US trends," the report stated

According to research firm, with risk aversion rising in the US in recent days, it is questionable whether the stocks in the country (US) can continue to rise without significantly better economic data in coming months.

Moody's Economy.com said, "The major reason to question the strength of the recent rally is the state of the global economy."

The developed world is still in recession, relying on fiscal and monetary stimulus on a scale unseen since World War II, it said.

The Bombay Stock Exchange's benchmark index Sensex has gained nearly 50 per cent so far this year and over 83 per cent since March 9. The domestic stock markets have witnessed the inflow of over $5 billion so far in 2009 by foreign institutional investors.

Meanwhile, global investors have expressed confidence in the global recovery, with well over half of them expecting world economy to improve in the next 12 months, says a Merrill Lynch report.

The upturn in global investor sentiment has withstood the recent large sell-off in bonds and witnessed a 5 per cent increase compared to the previous month, according to the Merrill Lynch Survey of Fund Managers for June.

"A net 62 per cent of respondents believe that the world economy will improve in the next 12 months, an increase of 5 percentage points since May," the report stated.

It revealed that investors have expressed confidence in global economic recovery and broadly in the equity markets, despite fears that sell-off would damage sentiment.

For the first time since December 2007 a majority of the asset allocators responding to the survey are overweight on equities. Further, just 7 per cent of the panel believes the world would go through recession in the coming year, a steep fall from 38 per cent in May and 70 per cent in April.

"Investors are currently ruling out the prospect of the much-feared double-dip recession, and have shrugged off the weakness in bonds," Banc of America Securities-Merrill Lynch Chief Global Equity Strategist Michael Hartnett said.

While investors are finally overweight equities, risk appetite remains relatively constrained, the report added.
Investors are rewriting the rules for positioning their portfolios at the start of a new investment cycle and are basing their strategy around optimism over Chinese growth and emerging markets performance.

A total of 226 fund managers, managing a total of $620 billion, participated in the global survey from June 5 to June 11. A total of 184 managers, managing $362 billion, participated in the regional surveys.

Besides, energy is the sector attracting the biggest positive sectoral swing in allocations this month with a net 30 per cent of the fund managers overweight on energy stocks, up from a net 18 per cent in May, the report added.

Global emerging markets (GEM) remains by far the most popular destination globally for equity allocations well ahead of the US, which is the second-favourite location, the report added.

How the Budget could hit your stocks

The Budget is expected to contain measures to accelerate growth while being fiscally prudent.

The Union Budget 2009-10, to be presented on July 6, will be notable in more ways than one.

ith the United Progressive Alliance getting a reasonably strong mandate in the May 2009 elections and the absence of major opposition from alliance partners, the market is expecting the Budget to announce bold measures to enhance economic growth in an 'inclusive' manner as well as introduce structural reforms.

he finance minister, nonetheless, has his task cut out due to the need for accelerated growth, meeting the needs of badly-hit segments and rural India, and simultaneously, ensuring that the government's already high fiscal deficit remains under control.

Markets will also be keenly watching out for signals that indicate the government's stance on key economic policies.

Striking the right balance

In an environment of slowing growth in India and abroad, the Budget is expected to take steps to revive domestic demand with a thrust on accelerating infrastructure spending (more importantly, to clear hurdles and speed up the pace of project execution).

There is also a strong belief that export-oriented and labour intensive sectors (textiles, apparels, gems, jewellery, leather) will receive extra attention.

Says Manish Sonthalia, senior VP Research & Strategy, Motilal Oswal Securities, "The external sector is actually bleeding given the 30-35 per cent y-o-y decline, thus expect the sector to get a lot of attention."

Among relief measures expected are interest rate and tax subsidies as well as higher export incentives. Likewise, given the UPA's stated policy of achieving 'inclusive' growth, the market is expecting sops for agriculture sector and rural India.

Says Nischal Maheshwari, head of Research, Edelweiss Capital, "Apart from measures for industry, there would be announcements pertaining to social infrastructure spending (schemes like NREGA) as well as for the common man."

For the latter, an increase in tax breaks on housing loans and lower taxes could materialise, aimed at encouraging higher consumption. The moot questions that come to the mind are how the government will bridge the revenue shortfalls and whether it will increase taxes for India Inc.

Sonthalia believes that some rationalisation in duties (excise and import) could happen. Levies on inputs could also be rationalised to bring it in line with end products.

There is a possibility of some sectors seeing the excise duties getting restated to levels prior to those existing before the stimulus packages were announced.

In simpler words, no major increase in taxes is expected. The government, however, is seen augmenting resources from the auction of 3G licenses (over Rs 30,000 crore) and selective divestment in public sector undertakings. These steps would help lower the fiscal burden, and encourage low real interest rates.

Broader expectations

Among key announcements, the market is hoping for a clear roadmap towards implementing goods and services tax by March 2010, which will eliminate the multiple taxes existing currently.

Experts are hoping that the fringe benefit tax, which contributes only 2 per cent to government's revenues, will be abolished as it involves huge administrative burden.

To sum up, while there are many expectations, some of it may just find a mention in the Budget with more details being spelt out later (like de-control of retail fuel prices and divestment). What's important is that even as hopes are running high, there is a sense of pragmatism about what can be achieved.

Says Sonthalia, "The markets will like to see an environment for growth and at the same time expect that the deficit be kept under control."

A populist Budget, however, is unlikely to go well with the markets. To know more on the expectations for individual sectors and its likely impact, read on.

Auto

On the back of excise duty cuts, drop in lending rates and new vehicle launches over the last six months, the industry has seen a revival of sorts with vehicle sales experiencing double digit growth between February and April.

While auto companies want the government to continue with the 8 per cent excise duty for smaller cars, they want the benefit to be extended to larger cars and utility vehicles; current duty is about 22 per cent.

However, some believe that the government might hike duties as a few manufacturers did not pass on the benefits of the duty cuts on small cars to consumers on their best selling models.

The industry's biggest pain point, however, has been the medium and heavy commercial vehicles which saw a 33 per cent y-o-y volume drop in 2008-09. The depreciation benefit on new CVs, which was extended to September from March 2009, could be pushed to March 2010.

The sector has also been asking for concession for UVs used in rural areas, rationalisation of VAT and provisions to boost vehicle exports.

Cement

The big boost for cement companies would come in the form of increased infrastructure spending and, incentives to the housing sector and rural India. This would help improve volumes and prove to be a boon, given that large capacities are expected to go on stream (over two years) possibly leading into an over-supply situation.

The industry is also hoping that the VAT rate will be lowered in line with other sectors, while a uniform rate of excise duty should replace the current MRP-based system. While such measures would be positive for companies, analysts don't expect the duty cuts or rationalisation to happen.

In fact, analysts at Angel Broking expect the government to increase excise duty from 8 per cent to 10 per cent, as cement companies have not completely passed on the benefits of excise duty reduction announced in April 2009.

FMCG

While the FMCG sector is more likely to gain indirectly led by focus on rural India or due to measures like implementation of GST next year, any reduction in VAT rate on biscuits from 12.5 per cent currently to 4 per cent should be positive for Britannia and ITC. Likewise, reduction in central sales tax from current 2 per cent levels will also be positive for all companies.

On the flip side, some analysts expect the government to roll-back the excise duty cuts done earlier. Should that happen, companies could pass on the increased costs by hiking prices and hence, the impact may not be really negative.

Analysts believe that there is a high probability of a hike in excise duty on cigarettes. However, any major increase (over 7 per cent) could potentially impact volume growth of cigarette companies like ITC.

Banking & Financial services

There are hopes of an increase in limit for tax deduction on interest on home loans from Rs 150,000 to Rs 250,000, which could spur demand for home loans to the benefit of banks and housing finance companies.

While SBI has set the consolidation run amongst public sector banks, any initiatives in this regard should improve market sentiments towards public sector banks. There are expectations of bold steps like lowering small-saving rates, which could indirectly lead to lower cost of funds for banks.

Measures like hiking FII holding limits in PSU banks, removal of voting rights cap (10 per cent currently) for FIIs in banks and increase in FDI limit in insurance sector to 49 per cent would make it easier for financial institutions and banks to raise capital for their expansions.

On securities transaction tax, experts believe that steps to phase it out or even reduce it would help improve trading volumes, which will benefit broking firms. Any move allowing higher deduction on interest earned from lending to infrastructure projects will lower the effective tax rate for lenders.

Capital goods

The increase in infrastructure spending, emphasis on power generation capacity addition and efforts to revive the economy are positive for companies like BHEL, ABB, Crompton Greaves and L&T.

Expectations of higher spending on rural electrification and other schemes such as RGGVY, which is in line with the objective of strengthening India's transmission network, distributing power to deficit areas and to reduce T&D losses, should lead to higher opportunities for Areva T&D, ABB, Kalpatru Power, Jyoti Structures, KEC

International, Emco and ICSA. If the 30 per cent export subsidy benefit on shipbuilding activities is extended, it will be good news for ABG Shipyard, Bharati Shipyard and L&T. Any visible increase in defence spending will rub positively on BEML and BEL.

Infrastructure & Construction

Infrastructure is one sector where expectations are the highest. Companies are hoping for measures to resolve issues pertaining to delays in project execution, project funding, high interest cost and lower than planned spending on various segments.

On a macro level, higher budgetary allocation for irrigation, road, port and, rural and urban infrastructure projects could provide the desired flip to the sector.

Analysts believe there could be more action in the irrigation and road segments, which could be positive for IVRCL Infra, HCC, Nagarjuna Construction and IRB.

An increase in the viability gap funding limits is also expected and is seen as a step towards improving the fund-flow for projects.

Additionally, any measures like bringing infrastructure bonds under Section 80C and re-introduction of Section 10 (23)(G), which could allow banks to claim the interest earned on long-term lending to infrastructure projects as tax deductible, would partially ease funding worries.

Initiatives to improve the execution pace of projects (various clearances, faster land acquisitions) are also on the wish list.

There are hopes of Section 80-IA benefits being extended to main contractors (now available to developers), which will help to reduce their tax liability.

The re-introduction of Section 80M, which allows deduction of dividends received from subsidiaries for computing dividend distribution tax at the parent company's level, could be positive for companies carrying out their business through separate subsidiaries or SPVs like GMR, Jaiprakash Associates, L&T and IVRCL among others.

Metals

Increased infrastructure spending should lead to higher demand for long-steel products. Companies, which have a higher proportion of long products in total sales, such as SAIL, JSW Steel and Tata Steel could benefit. The industry is expecting import duty on steel and aluminium to be doubled to 10 per cent, which will protect domestic steel manufacturers against cheap imports from China (China gives 9 per cent rebate on export of HRC) and CIS countries.

Such a move will also help non ferrous players like Nalco, Hindalco and Sterlite Industries. Expectations of a hike in export duty on iron ore to control domestic prices and improve raw material availability for steel makers are also there.

While such a move would be negative for Sesa Goa, it would be positive for companies like JSW Steel which do not have captive iron ore mines. Any move to deregulate coal mining will not only improve coal availability, but also help companies in improving their profitability and give them comfort to enhance capacities.

Oil & Gas

Crude oil prices at $70 a barrel suggest that under-recoveries, although lower than in 2008-09 (Rs 103,000 crore), would work out to Rs 50,000 crore (Rs 500 billion). The oil marketing companies (OMC) are losing Rs 6 per litre and Rs 2 per litre on petrol and diesel, respectively. Besides OMCs, upstream companies and the government (oil-bonds) would have to chip in majorly.

A full deregulation of fuel prices looks distant; however, there are expectations that retail fuel prices (say up to crude oil price of $75) would be partially de-regulated. If this comes through, it will be positive for OMCs. The move would also help private players like Reliance Industries as it creates a level playing field.

For ONGC, deregulation would lower its subsidy outgo. ONGC could also benefit if gas prices are hiked. A tax holiday for natural gas producers from NELP blocks will be positive for companies like Reliance Industries, while inclusion of natural gas as declared goods would benefit companies like Indraprastha Gas.

Power

The power sector, which is already facing headwinds on account of project delays, is expecting measures towards improving implementation.

Allowing private sector companies into the mining space could reduce problems of fuel supplies. An increase in funding ceiling for banks could partly sort the funding issues. Besides, there are demands for exemption of import duty on power equipments for sub-1,000 mw capacity, in line with over 1,000 mw projects, which will help lower cost for such projects.

Also, there is demand for extension of Section 80-IA benefits up to 2017 (from 2010). Steps towards the implementing the Planning Commission's proposal for a national electricity fund with a corpus of Rs 150,000 crore (Rs 1,500 billion) for investment in the T&D space will provide a major boost to equipment suppliers.

Software

The slowdown in the US and Europe (account for 60 per cent of India's software exports) has put tremendous pressure on domestic IT companies, especially the smaller outfits. Extending the tax benefits for software technology parks of India beyond March 2010 should help this labour intensive sector. Abolishing the FBT would also reduce some of pressures.

Telecom

For a sector that is adding over 11 million subscribers a month, growth is a given. The issue for telecom operators, who service over 450 million subscribers currently, is profitability. Service providers want the government to rationalise multiple levies (spectrum charges, licence fee and service fee) into a unified, single levy on revenue.

Operators want the tariffs which varies between 24-32 per cent to come down to levels in other Asian economies (below 10 per cent of revenues), says the COAI.

The association wants the government to reverse the provision inserted in the Budget for 2007-08, which denied tax benefits for amalgamation or demergers taking place after March 2007.

Further, COAI has asked for the tax benefits under Section 80-IA to be extended to new entrants, in line with services which commenced prior to April 2005.

The industry also wants the PAN requirement to be abolished as it is a hurdle in marketing mobile services to low-end subscribers. A reduction in duty on handsets has also been sought as operators prepare to penetrate the rural market.

Miscellaneous

The realty sector, which has been grappling with the collapse in demand and high debt, wants a hike in tax deduction on interest payment on home loans to Rs 2,50,000 a year, exemption of rentals on commercial properties from service tax and tax breaks for affordable housing projects.

A defensive sector, the healthcare industry has been growing at lower double digits.

The sector wants weighted deduction on research to be extended beyond 2010 and extend benefits on activities such as clinical trials and bio-equivalence studies done outside the research facility, reduction in excise duties of inputs (which are at 8 per cent even as formulations attract 4 per cent), extend tax holiday for hospitals in Tier 2 and 3 cities to 10 years, extend benefits under section 10A/10B to pharmaceutical exports beyond 2010-11 and finally, increase list of life saving drugs eligible of exemption from customs duty.

The textile industry, which has been impacted due to the slowdown in the US and Europe, is expecting measures that would help it stay profitable and competitive vis-a-vis countries like China.

They are hoping for a hike in duty drawback rate, cut in duties on machinery, increase in TUF allocation and interest rate subsidies among others.

Indian stocks: World's best performers

Indian stocks have emerged as the best performers among those in the emerging and the developed markets across the globe so far this year, giving investors the highest return of nearly 60 per cent.

According to an analysis by MSCI Barra Indices, a measure of returns from various stock markets across the world for foreign investors, Indian stocks have outperformed their global peers, including in the United States, the United Kingdom and China in 2009 so far.

The 133-year-old Bombay Stock Exchange (BSE) is the world's number 1 exchange in terms of the number of listed companies and the world's 5th in transaction numbers. Read on. . .

Indian stocks have provided a return of 59.30 per cent year-to-date, against 34.37 per cent gains provided by MSCI Barra's emerging market index, covering all developing nations.

Indian stocks have even outperformed all the developed world markets covered by MSCI Barra, as the markets in the US and the UK gave returns of just 2.33 per cent and 10.17 per cent, respectively, so far this year.

Among the emerging BRIC (Brazil, Russia, India and China) nations, the Brazilian market was the closest competitor with gains of 56.89 per cent till June 26 this year.

The Chinese and the Russian markets have given returns of 36.77 per cent and 41.61 per cent, respectively, in the year so far.

The 30-share benchmark index of Indian stocks, Sensex, gained over 5,000 points in the year so far to settle at 14,764.64 points on June 26 compared to 9,600 levels on December 31, 2008.

Other emerging markets which gave over 50 per cent returns so far this year include Indonesia (55.85 per cent) and Chile (51 per cent).

Analysts opined that the Indian markets have been rising on the positive global cues and got a positive spur from the decisive mandate in favour of Congress-led UPA in the general elections.

"The Indian stocks have been on a recovery path primarily in the past three months due to election results and on expectation of new government spurring the economic reforms in the country in the days to come," an analyst from a leading brokerage said.

Meanwhile, other developed markets including Canada gave 25 per cent returns, Sweden (21.42 per cent), Norway (24.70 per cent) and Japan (2.45 per cent), according to the data.

Further, Indian stocks have also performed significantly better in the past three months period up to June 26 and have given foreign investors returns of 62 per cent.

The Brazilian markets gave returns of 40 per cent, Russia 34.37 per cent and China 34.98 per cent in the three months.