An inflationary budget pulls Sensex down 209 pts, bond yields zoom

**3.30 p.m:**An inflationary and a political budget has pulled stock markets lower while bond yields have risen on a higher borrowing program set out by the government.

Widening the service tax bracket and increasing excise duty will cause prices to rise, which in turn will make it difficult for the central bank to lower interest rates. Increased borrowing on account of rising expenditure has led to a sell off in the bond markets. 10 year bond yield has moved up to 8.44 percent compared to 8.28 percent at the time of announcement of CRR cut.

Among the stocks that have reacted to budget recommendations areITC, which has gained 3.65 percent at Rs 216.10 on account a lower than expected rise in excise duty.

Oil producing companies led byONGC, CairnandReliancehave fallen on account hiking of cess on oil from Rs 2,500 per tonne to Rs 4500 per tonne. ONGC closed the day at Rs 273.30 down 4.66 percent, Cairn closed 6 percent lower at Rs 345.55 while Reliance closed 3.47 percent lower at Rs 769.

SBIclosed 3.11 percent lower at Rs 2227.95 as the budget puts to rest any hopes of interest rate reduction in the near future.

Capital Goods stocks too have fallen as the budget failed to give a direction for growth.L&Tclosed 3.17 percent lower at Rs 1319.80 whileBhel, which was also affected by no import duty hke for power generating equipment fell by 3.5 percent at Rs 273.55.

Atlas Cyclesclosed the day at the upper circuit of 20 percent at Rs 395.85 after the FM increased customs duty on bicycle.

Standard Charteredtoo touched the upper circuit of 20 percent at Rs 93.80 after the government allowed fungibility in IDR’s, which allows for arbitrage between the Indian listed stock and its parent company.

ONGC, Cairn fall 4% on imposition of oil cess

2.00 p.m: Oil companies ONGC and Cairn have fallen as details of the budget are visible. A cess of Rs 4,500 per tonne has been introduced, which leaves lower profit in the hand of these companies. ONGC trades 5 percent lower at Rs 272.20 while Cairn is down 5.6 percent at Rs 347.50 and Reliance is down 2 percent at Rs 780.

Sensex meanwhile trades at 17,640 down 33 points and Nifty has also slipped to 5378 down 2 points.

Bond yields jump to 8.42%, signalling rising inflation

1.30 p.m: Bond markets have started selling off on account of the high borrowing figure of Rs 4.80 lakh crore. Yields have moved to 8.42 percent signalling an era of high inflations which the borrowing and taxes will introduce.

Sensex meanwhile trades at 17,739 up 62 points while Nifty is up 25 points at 5405, highlighting the non-eventful budget.

Bhel trades 1 percent lower at Rs 281.10 as there no announcement on duties of power generation equipments.

A marginal reduction in STT has dampened sentiments of the market as they were expecting complete abolition of the tax.

Atlas Cycle, Stan Chart gain 20% on budget proposals

1.00 p.m: A political budget is how one can best described this budget.

None of the contentious issues were dealt with.

DTC, GST and FDI in aviation, retail and insurance have all been pushed forward.

Deficit though has been talked at 5.1 percent, there is nothing announced on how to meet it.

Sensex is up 30 percent to 17,705 while Nifty is up 10 points at 5388.

Bond yields have moved higher at 8.39 percent.

Inflationary budget pulls market lower

ITC has gained 6.5 percent on introduction of ad-valorem duties

Import duty on refined gold doubled

Excise duty oncigarettesincreased for lengths above 55 mm

Customs duty on Bicycles increased

Import of aircraft parts exempted from customs duty

Customs duty on coal imports removed – good for power generation companies like Adani Power

Bond yields move higher to 8.40 percent

Inflationary budget so far.

Increase in standard excise duty to 12%

Service tax increased from 10% to 12%

Service tax removed for movies – good for Eros International, Balaji Tele

Service Tax net expanded – 17 services negative list introduced.

STT reduced in cash market by 20 percent to 0.1 percent

Remove cascading effect of dividend distribution tax

Withholding tax on ECB reduced to 5% from 20%

No change in corporate tax

Tax slab – upto 2lakh – nil

Rs 2-5 lakh — 10 percent

Rs 5-10 lakh — 20 percent

greater than Rs 10 lakh – 30 percent

Advance tax removed for senior citizen

Personal tax exemption increased to Rs 2,00,000 ONLY

Expected fiscal deficit for 2012-13 is 5.1%

Tax collection increased by 10.6%

Standard Chartered has benefited from the IDR fungibility announced by the FM. This allows arbitrage between Indian listed company and its foreign parent

White paper on black money to be presented in current session

UID Allocation increased to over Rs 14,000 crore — positive for TCS and Vakarangee Software

Food Security bill not announced – thankfully

Kisan Credit Card to be used at ATM – bad for banks

Interest subvention for farmers at 7% to be continued, 3 percent addition for prompt payment – bad for banks

Agriculture – plan outlay increased by 18 percent

None of the expectations of the market have yet been met

ECB for working capital of airline industry allowed. FDI in aviation under consideration.

NHAI target of 8,800 km, target increased by 14 percent. ECB allowed for roads and highways

ECB allowed for power projects

Tax free bonds of Rs 60,000 crore to be introduced

Irrigation, Oil and Gas, teleco and telecom tower available for viability gap funding – positive for infrastructure companies

Sensex gains 185 points, Nifty up 57 points

Rs 15,888 crore provided for capitalisation of PSU banks – positive for PSU banks

Microfinance bill to be introduced in budget session – positive for SKS

IDR fungibility introduced

Rajiv Gandhi Equity Scheme introduced giving a tax benefit of Rs 50,000 crore

Multi brand Retail FDI unlikely

Disinvestment target at Rs 30,000 crore for 2012-13

GST and DTC not to be introduced in budget

Fertiliser subsidy to be directly available to the farmers. Good for fertiliser stocks

Subsidy to be 2% of GDP

Food subsidy will be fully provided for.

Tax-GDP ratio to be increased and subsidy reduced

Expenditure targets to be introduced with a three year target

Amendments to the FRBM act introduced

Sensex gains 150 points and Nifty is up 50 points at 5431

Expect GDP to be 7.6% for 2012-13

Expect inflation to moderate over the next few months

Pace of reform to be increased

Economy turning around says FM

11.00 a.m: Budget about to be presented. Sensex trades 65 points higher at 17,741 while Nifty is up 24 points at 5405.

Bhel gains 2.5% on duty hike of power generation equipment

10.10 a.m: Markets continue to trade in a narrow range ahead of the budget. Sensex trades at 17,748 a gain of 72 points while Nifty trades at 5406 a gain of 26 points.

Bhel has gained 2.8 percent to Rs 291.6 on hopes of a rise in import duty of power generation equipment.

Airline stocks too are trading higher as market expects a relief package for airline companies. Jet Airways trades 2.7 percent higher at Rs 338.70 while Kingfisher trades at Rs 21.60 up 3.8 percent and Spice Jet trades at Rs 25.45 up 1.6 percent. Finance Minister is discussing FDI of 49 percent with the cabinet.

Kingfisher up after salary assurances, Coal India down

9.15 am: The S&P crossed a four year high on Thursday, however, the sentiment was not reflected in the Asian markets, which are trading flat.

Indian markets are expected to remain subdued till the start of budget presentation by the finance minister.

BSE Sensex has opened 58 points higher at 17,734 while Nifty is up 20 points at 5400.

Among the stocks that are expected to react before the budget on the basis of overnight news flow is Coal India where the company is believed to divert a portion of the coal output meant for e-auction to power sector. This will impact the company’s profitability. The stock currently trades at Rs 339 down 0.35 percent.

Hexaware trades at Rs 116.85 near the previous day’s close on news of Fidelity Investments acquiring 7 percent in the company.

HDIL trades at Rs 107 up 2.3 percent after news hit the market that the promoters have pledged 98 percent of their stake.

Kingfisher trades at Rs 21.70 up 3.8 percent after the promoters assured the pilots of meeting their salary schedule.

Titan Industries trades at Rs 227.65 down 2.4 percent down on news of the company selling the recently acquired brand Favre Leuba.