Market reaction was harsher than measures affecting cos`s profits: Prateek Agrawal

Prateek Agrawal, head - equities, ABN AMRO Mutual Fund, commenting on today`s budget, said that the reaction of the market has been harsher than the impact of the budgetary measures on corporate profitability.

He further added that the budget has been an exercise in continuity. The FM had laid out a road map in the past as to what to expect, which has been broadly adhered to. The reaction of the market may seem to be harsh, but that may be more on account of the depressed global markets than the event itself.

The focus on education and training should be welcomed, he added. Ultimately it is the productive power of the people which translates into national wealth and if the earning capability of the masses improves, it would drive GDP growth.

The measures for controlling the prices of cement would seem to be harsh going by the trend of gradual duty reduction on commodities. It also raises concern over re-appearence of the black market. Similarly, MAT has been
imposed on the IT sector. However, the reaction of the market has been harsher than the impact of the measure itself on corporate profitability. For contracting companies, the tax exemptions under 80IA have been withdrawn with retrospective effect. This would increase tax outgo for the non-BOT business.

On the positive side, the tax structures have been left untouched, though against an expectation of a reduction in direct tax rates, there has been a small increase. New instruments have been introduced to enable project
funding. The market welcomes status quo on STT and capital gains taxes, Prateek says.

Measures on new hotels and convention centres, renewal of TUF, infrastructure and irrigation are positive. Real estate has also been left untouched, though there could be a marginal impact on account of service tax on rentals, he said.

Overall, the feeling is that the budget has focussed on micro management versus taking a big picture approach, he commented