S. Vaidya Nathan

THE Budget is good news. It has no major negatives to spook the bullish undertone in equities and could provide stimulus for industrial growth. Over the longer term, the possibility of a larger part of domestic savings getting routed to equities is a distinct positive, as such investments would qualify for tax savings.

Banking and engineering are two sectors that are likely to receive a boost.

That there would be progress on consolidation in the banking sector is clear and you could expect a few mergers in the coming fiscal.

The likes of Corporation Bank, Oriental Bank of Commerce, LIC Housing Finance, Bank of India, and Vijaya Bank may be likely participants in such a process. The statutory pre-emptions that are likely to be liberalised would benefit all banks.

The thrust on infrastructure is likely to provide a prop for industrial growth. The creation of a special purpose vehicle to bankroll such projects and the focus on irrigation and power projects are likely to be a positive for the likes of ABB, Siemens, Crompton Greaves, Kirloskar Brothers and L&T, to name a few.

Though stocks in this space have run up sharply over the past two years, the prospect for enhanced growth prospects is likely to provide a sound underpinning at current levels.

Big-bang changes in taxation of petro-products are likely to create more breathing space for refining-and-marketing companies such as Indian Oil, BPCL and HPCL.

But substantial upside is unlikely, given the heavy load of regulated-pricing pressures that they still have to bear.

Standalone refineries such as Chennai Petroleum and MRPL may come under stress.

For Reliance, the proposals on oil are likely to be a negative whose effect would be partially mitigated by measures that apply to its petrochemicals business.

The Budget may have a positive impact on earnings of FMCG companies by trimming input costs, reducing tax incidence and providing a fillip to consumption through expanding disposable incomes.

The Budget also contains measures that are positive for the tyres sector and the likes of Apollo Tyres, Ceat and MRF are likely to be prime beneficiaries.

For the textiles sector, it has been a mixed bag after a slew of positive measures for three years in a row.

Though the benefits to listed companies are likely to be of a moderate nature, they are likely to trade in firm terrain govern the overall favourable policy tilt.

Watch the likes of Mahavir Spinning, Raymond and Alok Industries. Companies in the synthetic textiles business such as Indo Rama Synthetics are likely to find excise benefits cancelled out by the reduction in Customs duty.

© Copyright 2000 - 2009 The Hindu Business Line