Market View

Our view on the Indian equity market is that after the pre and post Budget fall, the market can be expected to consolidate for some time. With respect to the budget provisions, some of the affected sectors have reacted sharply to discount the implications for them. While, the near term impact of introduction of marginal taxation across the sectors could impact the short term earnings of some corporates, however, the proposed investments in the infrastructure, power and irrigation etc. should continue to buoy the economy and corporate profits in the long term. In the long term, we believe that the focus on inclusive, broad based growth touching every segment of the society is extremely important, because only this can provide a sustainable growth over an extended period of time.

Tata Mutual

The reduction in the indirect tax rates across a host of products, including the key reductions in excise for petrol & diesel, are aimed at controlling the inflation rate, which is currently ruling at multi-year highs.

The markets reacted negatively to the budget proposals, in a weak environment triggered by a global equity meltdown. The key negatives for the markets were the increase in DDT, removal of tax sops for construction companies, inclusion of IT companies under the MAT umbrella and disappointment over lack of any reduction in direct tax rates. The cement sector was impacted from the increased excise rates. The Rs.190 per bag price was considered unrealistic and a possible negative impact was expected on demand from higher prices due to higher excise duty.

OptiMix

The markets have been under pressure in recent times due various factors and the weakness in the global markets had a greater impact on sentiment rather than the budgetary proposals. Indices have fallen across the board due to selling in certain sectors after the Union budget.

The technology sector has been under pressure due to move to include income under MAT and bringing ESOPs under Fringe Benefit Tax. Other sectors to come under pressure after the budget include cement, iron ore exporters and construction. The permission to allow mutual funds to launch dedicated infrastructure funds should help in directing more flows into the crucial sector.

The recent fall in the Indian markets has come about after a strong rally, and in that sense, it was to be expected. The sector-specific measures in the budget could result in downgrading of earnings for those sectors and near term sentiment is likely to remain bearish. Given the strong economic fundamentals, we believe that the medium to long- term outlook remains positive and investors can consider these levels as an entry point into the markets.