FM modifies dual duty on cement
Finance Minister P. Chidambaram altered the dual excise duty structure on cement. There will now be an ad valorem excise duty of 12% on cement retailed above Rs190 per bag as against the Rs600 per ton levy proposed in the budget on Feb. 28. The ad valorem duty is expected to lower the excise duty burden on cement by Rs7 per bag, Chidambaram told the Lok Sabha during a discussion on the Finance Bill 2007. On cement retailed below Rs190 per bag, the excise duty will remain Rs350 per ton. Prior to the budget, the excise duty on cement was Rs400 per ton, irrespective of the retail price.
In what is good news not just for the local iron ore mining companies but also for the Chinese steel makers, the Finance Minister said that the export duty on iron ore fines with Fe content of 62% or lower will be Rs50 per ton instead of the flat Rs300 per ton levy proposed in the budget. Excise duty on texturised vegetable proteins (soya bari) has been reduced from 8% to Nil. Similarly, excise duty on ready to eat packaged food has been reduced from 8% to Nil. Chidambaram exempted biscuits whose sale price does not exceed Rs100 per kg from excise duty. Excise duty on zippers has also been halved to 8%.
The Finance Minister has also exempted from customs duty import of aircraft by flying clubs and institutes for training purposes and by non-scheduled point-to-point and non-scheduled charter operators under certain conditions. Chidambaram also said that the Government will cut customs duty on nickel to 2% from 5%. This is likely to benefit local stainless steel producers and may even lead to a reduction in stainless steel prices. The Finance Minister also removed the 10% customs duty on refrigerated vehicles and brought down the excise/countervailing duty on the same to 8%.
In a move that will boost the diamond industry cut and polished diamonds have been fully exempted from customs duty. The import duty on cut and polished diamonds was reduced from 5% to 3% in the budget. But, the much-dreaded FBT on ESOPs stays. Employers can heave a sigh of relief as they will now be able to pass on the tax cost to employees. Also, FBT will be levied on the value of ESOPs at the time of vesting and not when the shares are transferred. The tax will be leviable only when the ESOPs are transferred.
RIL told not to sell gas to 3rd party
Shares of Reliance Natural Resources Ltd. (RNRL) climbed on Friday after it secured a stay from the Bombay High Court, restraining Reliance Industries Ltd. (RIL) from supplying natural gas from the KG Basin to a third party. Reliance Energy Ltd. (REL), part of the Anil Dhirubhai Ambani Group (ADAG), also gained amid expectations that the Bombay High Court ruling may help the company build the world’s largest gas-fired power plant at Dadri in Uttar Pradesh. RIL shares declined. The Bombay High Court order prevents RIL from selling 40 million standard cubic metres per day of gas (MMSCMD) out of its estimated production of 80 MMSCMD. The interim order restrains the Mukesh Ambani controlled RIL from selling the gas to any third party or using it for captive consumption.
RNRL, also part of ADAG, was entitled to buy 28 MMSCMD of gas from RIL at US$2.34 per million British thermal units (MMBTU). It had a claim on an additional 12 MMSCMD of gas originally committed to NTPC, if the gas contract with the public sector major fell through. In July 2006, the Petroleum Ministry asked RIL to increase the price of the gas it plans to sell to RNRL. " Selling gas at prices lower than what other private oil companies charge in India will reduce the royalty that the Government will earn," the Petroleum Ministry said on July 26, 2006. In November last year, RNRL filed an application in the Bombay High Court, seeking the implementation of the demerger agreement between the two brothers at the time of splitting the country's largest private sector group.
RIL said yesterday that it plans to appeal against the interim order in a division bench. "The Hon’ble High Court of Mumbai has passed an ad-interim order in respect of a part of the quantity of gas expected to be produced from KGD-6 area. The Copy of the Judgment is awaited," RIL spokesperson said. "RIL has been advised to prefer an appeal to the Division Bench against this order and intends to do so," he added. RIL shares fell by Rs40 or 2.5% to Rs1582 after being as low as Rs1577. RNRL was up 2.5% at Rs26.95 after rising by the daily limit of 4% to Rs27.35. REL gained 0.6% at Rs515 after touching an intra-day high of Rs524.
Fourth weekly gain on D-Street
Spiderman, Spiderman,
Does whatever a spider can
Spins a web, any size,
Catches thieves just like flies
Look Out!
Here comes the Spiderman
Despite Friday's profit booking, the bulls are slowly but surely mounting a bid to scale a new peak sooner or later. Good corporate results, buoyant global markets and renewed risk appetite among global investors for equities have aided the bulls in recent weeks. However, concerns about rising rupee, high interest rates and inflation may still spring some negative surprises in the coming weeks. Plus, monsoon will also have some bearing on the outlook for the Indian economy.
The benchmark BSE Sensex added 26 points or 0.2% during the truncated week to close at 13934. The NSE Nifty rose by 34 points or 0.8% to shut shop at 4117. This was the fourth straight weekly gain for the key indices. Interestingly, the CNX Mid-cap index outperformed the key indices and notched up gains of 3%. Other prominent gainers for the week included Capital Goods, Pharma, Metal, Small-Cap and Cement stocks. Banking stocks fell sharply after last week's gains.
Mid-Cap stocks are seeing some more action as investors looking for gains outside the frontline counters. IFCI, Nagarjuna Fertilizers, Bata India, TTML and Colgate had a dream run this week. IFCI surged after the public sector term lender posted a net profit of Rs6.44bn in the fourth quarter as against a loss of Rs1.05bn in the same quarter a year earlier. The net profit for FY07 is Rs8.98bn versus a loss of Rs740mn last year. Separately, the Board of Directors of the company passed an enabling resolution to increase the FII / FDI holding limit up to 74% of the capital.
RIL was in the limelight. The stock lost some of its gains on Friday after the Bombay High Court restrained the company from selling gas from its KG Basin field to any company other than RNRL. The scrip managed to close the week with gains of 2.8% to Rs1583. RIL said it plans to appeal the ruling.
Cement stocks got some relief after the Finance Minister altered the dual excise duty structure. There will be an ad valorem excise of 12% on cement sold above Rs190 per bag as against the Rs600 per ton proposed in budget. ACC added over 4% to Rs859, Mangalam Cement advanced by over 2% to close at Rs152 and Grasim surged by over 1.5% to Rs2475.
The BSE Banking index declined led by a sharp fall in ICICI Bank. The scrip suffered its biggest fall in three years on concerns that the planned Rs200bn fund raising will hurt earnings. The stock lost over 8% during the week to Rs855. Others like HDFC Bank fell by 3% to Rs1008. However, SBI gained 2.7% to close at Rs1129.
Auto stocks were in action after the companies declared their monthly sales figures. Hero Honda advanced by over 4% to Rs698 after its April sales rose 4.86% to 262,544 units. Tata Motors lost 2% to Rs733. The company posted a 10.7% rise in its April sales. Maruti advanced by over 1.4% to Rs806. Maruti clocked a 16.75% rise in April vehicle sales at 50,352 units.
Firm metal prices boosted the metal stocks. Tata Steel recorded healthy gains of 2.8% to Rs553. The company unveiled refinancing of bridge loan to fund its acquisition of Corus Group Plc.
Bulls eye next big trigger
Though the bulls managed to eke out fourth weekly gains amid high volatility the trend for the next week looks uncertain. Having said that we don't see a major downfall from these levels either. The upside too will be capped unless FIIs continue to pump money into Indian shares like they did in April. The market is likely to remain in 'no-man's-land' for a while as key events such the monetary policy and quarterly earnings are behind us now. Key indices will witness alternative bouts of buying and selling as investors look for value following the last month's rally. A lot of portfolio churning is expected and action will be much more stock specific. Much will depend on liquidity and the trend across the global markets. Currency, metal and commodity markets will also have a role to play in driving sentiment. Investors may just decide to take it easy after a terrific run- up over the last few weeks. The market is surely running out of fuel and needs fresh catalyst(s) to lift the benchmark indexes past the previous all-time peaks. Monsoon will be the next big trigger. Till then, there's going to be lot of choppiness.