Indian stocks edged lower after witnessing immense intraday volatility after Finance Minster Arun Jaitley made a number of announcements in Union Budget 2014-15 such as a proposal to increase in foreign direct investment in insurance and defence manufacturing, a sharp increase in plan expenditure, measures to boost long term financing for infrastructure by banks and provided clarity on taxation with respect to foreign portfolio investors. Market expectations that the Finance Minster would scrap the law on retrospective taxation were not met. The barometer index, the S&P BSE Sensex, fell 72.06 points or 0.28%, off close to 548 points from the day's high and up about 256 points from the day's low. At the day's low of 25,117, the Sensex fell 327.81 points or 1.28%, while at the day's high of 25,920.46 the Sensex gained 475.65 points or 1.86%. The market breadth indicating the overall health of the market was positive. The Sensex and the CNX Nifty, both, hit their lowest closing level in nearly two weeks. Weakness in European stocks caused by fears over the health of one of Portugal's biggest banks weighed on Indian stocks which reversed direction after surging in afternoon trade after the Finance Minister's Budget speech was over.
Bank stocks declined after the finance minister said in the Union Budget 2014-15 that the capital of banks will be raised by increasing the shareholding of the people in a phased manner through sale of shares largely through retail to common citizens of the country. Construction stocks rose. Footwear stocks were in demand after Finance Minister proposed to cut excise duty to 6% from 12% on footwear. ITC rose despite Finance Minister proposed to increase the specific excise duty on cigarettes in the range of 11% to 72%.
Realty stocks surged after the finance minister said the government will provide tax incentives for Real Estate Investment Trusts and hiked the deduction limit on interest on housing loan in respect of self occupied house property from Rs 1.5 lakh to Rs 2 lakh. Shares of power generation and power distribution firms rose after the Jaitley announced a ten-year tax holiday to the power sector undertakings, which begin generation, distribution and transmission of power by 31 March 2017.
The Budget proposed that income of foreign portfolio investors from transaction in securities will henceforth be treated as capital gains and not business income. There is no long term capital gains tax on sale of shares if the shares are held for a period of more than a year. Short term capital gains tax on sale of shares is 15%. Short term capital gains tax is payable when the shares are sold within a year of buying.
Jaitley defied expectations that he would scrap the law on retrospective taxation. Jaitley said the government will not ordinarily bring about any change in taxation retrospectively which creates a fresh liability for tax payers. All fresh cases arising out of the retrospective amendments of 2012 in direct transfers will be scrutinized by a high level committee to be constituted by the CBDT before any action is initiated in such cases, the Finance Minister said.
The Finance Minster said the government is aiming sustained growth of 7-8% or above within the next 3-4 years along with macro-economic stabilization that includes lower levels of inflation, lesser fiscal deficit and a manageable current account deficit. The Finance Minister has kept a target of limiting fiscal deficit to 4.1% for the current fiscal and decided to reduce it further to 3.6% in 2015-16 and 3% in 2016-17. The government's total borrowing requirement for 2014-15 has been budgeted at Rs 600000 crore or 4.7% of GDP. Net market borrowing of Rs 461205 crore has been budgeted to finance about 86.8% of fiscal deficit in 2014-15. In 2013-14, net market borrowings at Rs 468902 crore financed about 92% of gross fiscal deficit.
The Finance Minister said that the Centre is committed to implement GST at the earliest and the issues raised by state governments will be resolved soon.
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Jaitley said that the government will constitute an Expenditure Management Commission to look into every aspect of expenditure reform. The government also intends to overhaul the subsidy regime while providing full protection to the marginalized, Jaitley said. The government has adopted the policy of gradually increasing the diesel prices to eliminate under recovery and deregulate the diesel prices. It is expected that the gap between administered price and market price of diesel would be eliminated by early FY 2014-15, the Finance Ministry said in its fiscal policy strategy statement.
With a revised Direct Tax Code already placed in public domain in March 2014, the government will consider the comments received from stakeholders on the revised Code, Jaitley said. He said that the government will review the DTC in its present shape and take a view in the whole matter.
Jaitley said that the government will promote foreign direct investment (FDI) selectively in sectors. The FDI cap in both the insurance sector and defence manufacturing is proposed to be increased to 49% from the current level of 26%, with full Indian management and control, through the FIPB route. FDI is also being encouraged in the development of smart cities, Jaitley said.
The government expects to raise Rs 43425 crore from PSU divestment and Rs 15000 crore from divestment of stake in non government companies in 2014-15.
The Budget has forecast 26.9% growth in Plan expenditure at Rs 5.75 lakh crore in 2014-15. Non-plan Expenditure for the financial year is estimated at Rs 12.19 lakh crore with additional provision for fertilizer subsidy and capital expenditure for armed forces.
The S&P BSE Sensex fell 72.06 points or 0.28% to settle at 25,372.75, its lowest closing level since 27 June 2014. The index jumped 475.65 points at the day's high of 25,920.46 in mid-afternoon trade, its highest level since 8 July 2014. The index shed 327.81 points at the day's low of 25,117 in early afternoon trade.
The CNX Nifty fell 17.25 points or 0.23% to settle at 7,567.75, its lowest closing level since 27 June 2014. The index hit a high of 7,731.05 in intraday trade, its highest level since 8 July 2014. The index hit a low of 7,479.05 in intraday trade, its lowest level since 23 June 2014.
The total turnover on BSE amounted to Rs 5080.15 crore, higher than Rs 3840.79 crore on Wednesday, 9 July 2014.
The market breadth indicating the overall health of the market was positive. On BSE, 1,625 shares gained and 1,250 shares fell. A total of 88 shares were unchanged.
The BSE Mid-Cap index rose 54.82 points or 0.60% to 9,132.18. The BSE Small-Cap index rose 75.82 points or 0.76% to 10019.97. Both these indices outperformed the Sensex.
The S&P BSE Realty index (up 4.96%), the S&P BSE Power index (up 1.12%), the S&P BSE Metal index (up 0.94%), the S&P BSE FMCG index (up 0.33%), the S&P BSE Capital Goods index (up 0.18%), the S&P BSE Oil & Gas index (up 0.05%) and the S&P BSE Healthcare index (up 0.01%) outperformed the Sensex.
The S&P BSE Consumer Durables index (down 3.11%), the S&P BSE Auto index (down 0.91%), the S&P BSE IT index (down 0.89%), the S&P BSE Teck index (down 0.87%) and the S&P BSE Bankex (down 0.63%), underperformed the Sensex.
Among the 30 Sensex shares, 17 fell and the remaining shares rose.
Construction stocks rose. NCC (up 5.55%), KNR Constructions (up 4.96%), Madhucon Projects (up 4.88%), PBA Infrastructure (up 4.88%), IRB Infrastructure Developers (up 4.18%), Gammon India (up 3.93%), Unity Infraprojects (up 2.05%), IVRCL (up 1.8%), Ashoka Buildcon (up 1.75%), Gammon Infrastructure Projects (up 1.71%), Valecha Engineering (up 1.61%), Pratibha Industries (up 1.39%), Simplex Infrastructures (up 1.02%), Sadbhav Engineering (up 0.54%) and Hindustan Construction Company (up 0.47%), edged higher.
Jaitley said that the government will provide Rs 37880 crore for road construction by National Highways Authority of India. A total of 8,500 KMs of roads will be added in this financial year. The Budget has provided Rs 14389 crore for rural road development projects in 2014-15 under the Pradhan Mantri Gram Sadak Yojana.
Bank stocks edged lower. Among PSU banks, Union Bank of India (down 1.58%), State Bank of India (down 1.31%), Punjab National Bank (down 1.06%), Bank of Baroda (down 0.95%) and Bank of India (down 0.55%), edged lower.
Expressing concerns over the rising non performing assets (NPA) of Public Sector Banks (PSBs) the Union Finance Minister announced setting-up of six new Debt Recovery Tribunals at Chandigarh, Bangaluru, Ernakulum, Dehradun, Silliguri and Hyderabad.
He also said that there is a requirement to infuse Rs 2.4 lakh crore as equity by 2018 in the public sector banks. To meet this huge capital requirement, additional resources have to be raised. By selling the shares through retail, the citizens will get direct shareholdings in these banks even as the government will continue to have majority shareholding. Jaitley said that government will also examine the proposal to give autonomy to the banks while making them accountable.
Among private sector banks, IndusInd Bank (down 1.14%), ICICI Bank (down 0.88%), Axis Bank (down 0.78%) and HDFC Bank (down 0.65%), edged lower. However, Kotak Mahindra Bank rose 0.43%.
The Finance Minister said that banks will be permitted to raise long term funds for lending to infrastructure sector with minimum regulatory pre-emption such as CRR, SLR and Priority Sector Lending. On the assets side, banks will be encouraged to extend long term loans to infrastructure sector with flexible structuring to absorb potential adverse contingencies, sometimes known as the 5/25 structure.
The Finance Minister said that after making suitable changes to current framework, a structure will be put in place for continuous authorization of universal banks in the private sector in the current financial year. He said RBI will create a framework for licensing small banks and other differentiated banks. Jaitley said differentiated banks serving niche interests, local area banks and payment banks etc. are contemplated to meet credit and remittance needs of small businesses, unorganized sector, low income households, farmers and migrant workforce among others.
Shares of firms operating in the power sector rose after the Jaitley announced a ten-year tax holiday to the power sector undertakings, which begin generation, distribution and transmission of power by 31 March 2017. JSW Energy (up 3.78%), Torrent Power (up 3.43%), Adani Power (up 3.12%), Tata Power Company (up 2.72%), Crompton Greaves (up 2.22%), Reliance Infrastructures (up 2.21%), Suzlon Energy (up 1.78%), ABB (up 1.64%), NHPC (up 1.43%), Power Grid Corporation of India (up 1.21%), GMR Infrastructure (up 0.89%), Reliance Power (up 0.78%) and NTPC (up 0.47%), edged lower.
Jaitley proposed Rs 200 crore for power reforms. Further, the Finance Minister has proposed to allocate an initial sum of Rs 100 crore for preparatory work for a new scheme "Ultra-Modern Super Critical Coal Based Thermal Power Technology" to promote cleaner and more efficient thermal power.
Jaitley also announced comprehensive measures for enhancing domestic coal production with a stringent mechanism for quality control and environmental protection. Measures will be initiated to provide adequate quantity of coal to power plants which are already commissioned or would be commissioned by March 2015 to unlock dead investments.
To further improve rural life, the government will launch the Deen Dayal Upadhyay Gram Jyoti Yojana to augment power supply at a cost of Rs 500 crore.
To promote wind energy, Jaitley proposed to reduce the basic customs duty from 10% to 5% on forged steel rings used in the manufacture of bearings of wind operated electricity generators. Also, he proposed to exempt the SAD of 4% on parts and raw materials required for the manufacture of wind operated generators. Further, he proposed to prescribe a concessional basic customs duty of 5% on machinery and equipment required for setting up of compressed biogas plants (Bio-CNG).
Realty stocks surged after the finance minister in the Union Budget 2014-15 said the government will provide tax incentives for Real Estate Investment Trusts and hiked the deduction limit on interest on housing loan in respect of self occupied house property from Rs 1.5 lakh to Rs 2 lakh. DLF (up 9.22%), Peninsula Land (up 7.24%), Prestige Estates (up 6.86%), HDIL (up 5.25%), Indiabulls Real Estate (up 5.04%), D B Realty (up 4.97%), Sobha Developers (up 2.73%), Phoenix Mills (up 2.31%), Parsvnath Developers (up 2.1%), Sunteck Realty (up 1.92%), Oberoi Realty (up 1.79%) and Anant Raj (up 1.08%), edged higher.
Jaitley said the government is committed to its endeavour to have housing for all by 2022 by extending additional tax incentive on home loans to encourage people, especially the young, to own houses. It has proposed to set up a Mission on Low Cost Affordable Housing to be anchored in the National Housing Bank. A a sum of Rs 4000 crore has been earmarked for National Housing Bank with a view to increase the flow of cheaper credit for affordable housing to the urban poor/EWS/LIG segment.
Jaitley said that the Rural Housing Scheme has benefited a large percentage of rural population who have availed credit through Rural Housing Fund (RHF). In the light of the above, enhanced allocations to the tune of Rs 8000 crore has been made for National Housing Bank (NHB) for the year 2014-15 to expand and support Rural Housing in the country.
To encourage development of Smart Cities, requirement of the built up area and capital conditions for foreign direct investment (FDI) is being reduced from 50,000 square metres to 20,000 square metres and from $10 million to $5 million respectively with a three year post completion lock in. To further encourage this, projects which commit at least 30% of the total project cost for low cost affordable housing will be exempted from minimum built up area and capitalization requirements, with the condition of three year lock-in.
India's largest cigarette maker by sales ITC rose 0.32% at Rs 342.50. The stock hit a high of Rs 348 and a low of Rs 337.25. In the Union Budget 2014-15 today, 10 July 2014, Finance Minister Arun Jaitley proposed to increase the specific excise duty on cigarettes in the range of 11% to 72%. Similar increases are proposed on cigars, cheroots and cigarillos.
Likewise, the excise duty was increased from 12% to 16% on pan masala, from 50% to 55% on unmanufactured tobacco and from 60% to 70% on gutkha and chewing tobacco.
Footwear stocks were in demand after Finance Minister proposed to cut excise duty to 6% from 12% on footwear. Relaxo Footwear (up 5.53%), Liberty Shoes (up 3.97%) and Bata India (up 3.68%), edged higher.
Reliance Capital clocked a highest turnover of Rs 152.48 crore on BSE. IDFC (Rs 142.76 crore), State Bank of India (Rs 135 crore), Aban Offshore (Rs 123.78 crore) and Reliance Infrastructure (Rs 103.28 crore), were the other turnover toppers on BSE in that order.
Unitech reported highest volumes of 2.60 crore shares on BSE. IDFC (95.69 lakh shares), HDIL (82.55 lakh shares), REI Agro (82.28 lakh shares) and IFCI (74.51 lakh shares), were the other volume toppers on BSE in that order.
The Sensex has fallen 727.33 points or 2.79% in three trading sessions from a record closing high of 26,100.08 on 7 July 2014. The Sensex has fallen 41.03 points or 0.16% in this month so far (till 10 July 2014). The Sensex has gained 4,202.07 points or 19.85% in calendar year 2014 so far (till 10 July 2014). From a 52-week low of 17,448.71 on 28 August 2013, the Sensex has risen 7,924.04 points or 45.41%. From a record high of 26,190.44 on 8 July 2014, the Sensex has fallen 817.69 points or 3.12%.
Fears over the health of one of Portugal's biggest banks triggered a sell-off in Europe's stock markets on Thursday, 10 July 2014, and sent Lisbon's borrowing costs sharply higher, with the turmoil threatening to hit company flotations and bond sales. Key benchmark indices in UK, France and Germany were off 0.78% to 1.50%.
Espirito Santo Financial Group suspended trading in its shares Thursday, 10 July 2014, as it addressed accounting irregularities at Espirito Santo International, its largest shareholder. Espirito Santo Financial Group is, in turn, the largest shareholder in Banco Espirito Santo, Portugal's largest bank.
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