Opening Bell 1 March | Markets react adversely to Budget 2013

live mint ; Krishna Merchant ;Fri, Mar 01 2013. 08 15 AM IST
Indian markets were down following the budget with little to cheer investors

Mumbai: The Union Budget for the next fiscal left the markets struggling as finance minister P. Chidambaram tried to balance political compulsions with fiscal consolidation. While the government increased spending for next year, it is betting on growth, tax on rich and reduced subsidies to get its math right.

Globally, the rally stalled on Wall Street following mixed data on growth and employment, and automatic spending cuts. Estimates of US growth in the fourth quarter of 2012 were revised up lower than expected and automatic spending cuts of $85 billion could threaten growth, reported Financial Times. The Dow Jones Industrial Average was down 0.2%, S&P 500 and Nasdaq Composite fell 0.1% each.

Asian markets were trading lower on Friday morning tracking weak cues from Wall Street on concerns that spending cuts will weigh on economic recovery in US. Japan’s Nikkei Stock Average slipped 0.2%, Hong Kong’s Hang Seng was down 0.3% and China’s Shanghai Composite fell 0.1%.

In India, Standard and Poor’s kept India’s rating unchanged and said the budget was along expected lines in terms of curbing the fiscal deficit in the medium term. Fitch also said the budget was consistent with the fiscal and economic policies of recent months.

Power stocks may continue to remain under pressure with electricity generated from imported coal likely to become costlier by around 3.5 paise a unit after the finance minister removed duty concessions granted in last year’s budget, reported Mint. Instead, the finance minister imposed an equivalent duty on different types of coal imported for electricity generation.

In order to kick-start the infrastructure cycle, the budget has allowed for deduction of investment allowance of 15% on investments of Rs.100 crore in the next two fiscal years. The finance minister also announced that contracts for 3,000km stretch of roads would be awarded within the first six months of the next fiscal. Tata Motors Ltd and Ashok Leyland Ltd may see medium term benefits as an additional sum was committed for purchasing 10,000 buses under the urban renewal scheme.

Mahindra and Mahindra will continue to remain under pressure as the excise duty on sport utility vehicles was raised from 27% to 30%, in the budget. Prices of SUVs like Mahindra’s XUV 500, Scorpio, Toyota’sInnova could increase by up to Rs.60,000 after the budget announcement, reported Economic Times.

Suzlon Energy Ltd shares fell to an all-time low on Thursday after the wind-turbine maker said that its founder sold Rs.240 crore worth shares or 6.19% in the market. The funds raised will be invested back in the company to meet the prerequisite for the debt-restructuring plan its lenders have approved, reportedWall Street Journal India.

Lastly, the Indian budget seemed to be a ladies special with the announcement of women’s-only bank to create employment opportunities and facilitate funding for women.