The Hindu Business Line : Sunday, March 03, 2002

Telecom: A breather
Budget 2002-03 has extended to the telecommunications industry the benefit of carryforward and setting off of past losses under Section 72A of the Income Tax Act. Given the complex chain of companies created by telecom companies over the ... More

AUTOMOBILES

Auto industry: A familiar road
THE Budget had nothing specific to offer the automobile industry. But given the constraints under which the Finance Minister had to draw it up, the industry did not expect any direct incentives in the form of duty cuts. However, there are still ... More

BUDGET

Large deficits mean higher taxes
ECONOMIC reality does not completely conform to economic theory. There are always deviations from the theoretical framework. However, in India, the theoretical prognosis of the implications of large deficits has now been borne out by facts. The ... More

A salaried employee's nightmare
THE Budget 2002-03 will stretch the average Indian household income like never before. Even as the Budget lacks in measures that could incentivise increased savings, it is simultaneously applying increased cost pressure on family income. How will ... More

CEMENT

Cement: Living in derived hope
For the cement sector, there has been no direct move that could be termed positive or a negative. The industry's demand for lower tariffs on some inputs has not been acceded to. What may work in the industry's favour, however, is the stress on ... More

INSURANCE

Insurance products more pricey
MR YASHWANT Sinha's tax proposals have dealt a mortal blow to the private life insurance companies. It is early days yet for private insurers, but they face an uphill task in a country where tax benefits and investment returns count when people ... More

MUTUAL FUNDS

GIC Fortune `94: Switch
UNITHOLDERS in GIC Fortune '94 may consider paring their exposures in it and switch to a fund with a better performance record. The fund's NAV has run up sharply on the back of investment interest in stocks of public sector companies. Given that ... More

Alliance Basic Industries: Book profits/Re-enter at lower levels
INVESTORS in the open-ended sectoral fund of Alliance Capital, Alliance Basic Industries can contemplate cutting down exposures to take advantage of the run-up in stock prices in the last three months or so. Any uptrend immediately after the ... More

Sundaram Balanced Fund: Hold
THOSE holding units in Sundaram Balanced Fund can stay with the fund for now. Given the fund's relatively short track record, new investors can wait and evaluate performance for another year before considering investments. The fund has ... More

Budget: Unintended consequences
WHEN mutual funds were favoured in earlier years by the Finance Minister, there was an unintended positive consequence for the government. Inflows were diverted from the banking system into mutual funds. The implication was that monies were ... More

Relief from dividend tax withdrawal
THE withdrawal of the tax of 10 per cent on dividends distributed by mutual funds may provide a breather to the assured return income schemes. The softening interest rate regime had made it difficult for assured return schemes to match the high ... More

MF investors in for taxing times
BY DOING away with the distribution tax on dividends paid by mutual funds and shifting the responsibility for paying income-tax to the investor, the Budget 2002 has significantly reduced the effective returns from dividend-paying mutual fund ... More

Tax-savings schemes -- Visible lack of interest
THIS is time of the year when investment for tax saving purposes is at significant levels. But tax savings schemes of mutual funds seem to be totally out of the reckoning, not only in the last two months but for much of 2001-02 as well. This is ... More

PETROCHEMICALS

Petrochemicals: Stress across the board
THOUGH there are no direct proposals in the Budget as far as major petrochemical products go, there is likely to be an overall impact from the drop in peak duty rates from 35 per cent to 30 per cent. This means that the protection will be lower ... More

PETROLEUM

Oil: Slippery terrain
THE dismantling of the administered price mechanism is expected to have a favourable impact on the marketing margins of the oil companies — Indian Oil Corporation, BPCL, HPCL and IBP. By increasing the Customs duty on kerosene from 8 to ... More

PHARMACEUTICALS

A shot in the arm for MNC pharmas
FOR the pharmaceutical sector, the Budget was a letdown. Conspicuous by its absence was a package of incentives for research and development (R&D) at a time when the domestic industry needs it most. The industry has had to settle for piecemeal ... More

Indian pharma cos: Budget pains
Three years from now, domestic companies will lose the opportunity to introduce the latest drugs under patent in the developed markets. India's obligations to the WTO necessitate a change in patent regulations to recognise product patents. ... More

STEEL

Steel: Docked despite the package
Steel stocks may have little respite despite Budget 2002-03's largesse. The near term sentiment in stocks such as Jindal Vijayanagar Steel and Essar Steel (as HR Coil manufacturers) may improve. But unless the industry's long-term structural ... More

STOCKS

Hind Lever: Book profits and re-enter
EARLY indications of a recovery in rural demand and some favourable Budget proposals have catapulted the Hindustan Lever stock to its 52-week high over the past week. After appreciating by around 14 per cent over the past two weeks, the stock ... More

Henkel SPIC: Hold/Avoid fresh exposures
A midget in an industry dominated by giants, Henkel SPIC has managed impressive growth rates over the past four years, thanks to acquisitions and active support from its parent. The company has focussed on its strengths at the higher end of the marke t to register a turnaround in profitability. An improvement in the return ratios will be crucial for a higher valuation of the stock, says Aarati Krishnan. More

Birla 3M: Buy
TRADING at around Rs 271, the stock of Birla 3M is a good investment option for a medium-to-high risk portfolio. It trades at a price-earnings multiple of around 22 times the latest earnings. The company's earnings performance for the year-ended ... More

ABB: Hold/Buy on declines
THE earnings performance of ABB for the year ended December 2001 rings positive for investors. The topline growth has been stable on a quarter-on-quarter basis this year. More significant is the strong order book position, shift in the revenue ... More

Indian Rayon: Hold
INDIAN Rayon is going through a bad patch. The company's performance for the third quarter ended December 2001 was mediocre, mainly because of internal factors. While the acquisition of Madura Garments is helping topline growth, the figures for ... More

Indo Matsushita: Buy on declines
DESPITE the recent improvement in the valuations of quite a few companies, long-term investors could look for equity exposures in fundamentally sound companies with a track record of consistent dividend payouts. One such company is Indo ... More

TAXATION

Higher tax surcharge: No major impact
THE special surcharge of 2 per cent (for the Gujarat earthquake crisis) imposed in the 2001-02 Budget has been abolished in the latest Budget. However, a fresh surcharge of 5 per cent has now been imposed. This surcharge would be applicable to ... More

Tax on dividends: Ouch!
THE proposal to tax dividends in the hands of the shareholder as against the company seems to have evoked a negative response in the market. Predictably so. Given that a large proportion of shareholders fall in the highest tax bracket of 30 ... More

TEA

Tea: This cup runs over
THE valuation of tea majors such as Tata Tea, Goodricke, Jayshree and Warren Tea might show some gains in the short term on the back of the cut in excise duty to Rs 1 per kg from Rs 2 per kg and the rise in Customs duty to the much preferred ... More

TYRES

Tyres: Not a smooth ride
The tyre industry would probably have a very marginal positive impact if the overall Budget proposals are taken into consideration. The reduction in peak rate of Customs duty from 35 per cent to 30 per cent would result in a lower input cost for ... More

BREWERIES

Liquor: A worrisome brew
The likes of McDowell, Shaw Wallace, Mohan Meakin and Jagatjit Industries have reason to worry because of the impact of the proposed Budget provisions. The FM has announced a significant drop in the import duties on liquor thereby reducing the ... More

PERSONAL PRODUCTS

FMCGs: Dividends lose sheen
BUDGET 2002 has a mixed impact on FMCG companies. Though the hike in surcharge on corporate tax may enhance tax incidence, the rollback of the distribution tax on dividends may leave FMCG companies with larger distributable surpluses. However, ... More

HARDWARE

Computer hardware: Big boost
For the computer hardware industry a big positive has been the rollback in the Information Technology Agreement under the World Trade Organisation, which is to usher in a zero-duty regime from 2003 to 2005. This is slated to impart greater ... More

SOFTWARE

Computer software: Wrong signals
For the computer software industry, the Budget is forgettable. Instead of maintaining the status quo, the tinkering with Section 10 A and 10 B of the Income Tax Act has turned out to be a sore point. The Budget proposes to curtail the 100 ... More

ALUMINIUM

Aluminium: Hammered
It was a double whammy for the aluminium industry. First, the reduction in the import tariff on aluminium from 25 per cent to 15 per cent has resulted in the landed cost of aluminium slipping below the domestic price. If the sluggish domestic ... More

METALS

Copper: A dull shine
The operational profile copper industry players — Sterlite Industries and Indo Gulf Corporation — are likely to suffer following the lowering of the import tariffs from 35 per cent to 25 per cent. The lowered TC/RC (treatment charges ... More

READYMADE GARMENTS

Readymade garments: A better fit
The stocks of companies such as Zodiac, Raymond and Indian Rayon will probably see firm trends after the cut in excise duty from 16 per cent to 12 per cent. Budget 2001-02 removed the tax exemptions on the readymade garments sector, imposed an ... More

DAIRY & DAIRY PRODUCTS

Dairy products: Milky war
The promised review of the Milk and Milk Products Order, which protects milkshed areas for dairy companies, could intensify competition for procurement for the major dairy players. This could lead to an escalation in input prices over time. ... More

HOUSING FINANCE

Housing Fin.: Special treatment
HDFC has had reason to be pleased with every Union Budget in the last five years. Five years in a row, the budgets have provided fiscal incentives for individuals to invest in housing units, and the upshot is that HDFC's housing loan disbursement ... More

SMALL SAVINGS

Savings vs consumption
THE 2002-03 Budget has made it less attractive to save. You will receive only a 10 per cent tax rebate, instead of 20 per cent earlier, if you invest in small savings/life insurance, and only if your income is less Rs 5 lakh. This has prompted ... More

DEBT MARKET

Bias for soft rates continues
THE bond market did not seem very enthused by the Budget. The benchmark 10-year bond yields rose about one-hundredth of a basis point (bps) to 7.30 per cent. The yield curve, thus, remained at the pre-budget levels. The lack of positive ... More

DERIVATIVES MARKETS

Sensex February contract volumes down
OVERALL Trends: The cash markets displayed higher levels of volatility with the rising uncertainty over the communal tensions in Gujarat. On a week on week basis, the BSE Sensex gained close to 2.1 per cent to close the week at 3678.8 ... More

Selling Satyam March 320 calls may pay
Index Options: Trading interest in index calls was more or less stable during the week. As was the case last week, two calls managed to find a place in the list of top 10 traded contracts. The performance of index puts was relatively ... More

Satyam, Reliance evoke more trading interest
FEBRUARY contracts terminated during the course of the preceding week's single stock futures trading sessions. A look at the turnover during the week's trading showed that February and March contracts dominated the show. Generally, contracts ... More

Options help guide

Futures guide

FINANCIAL INSTITUTIONS

FIs: Focus on IDBI
The proposal to initiate corporatisation of IDBI is the most significant development. Corporatisation will clear the way for IDBI's merger with a bank. While a merger with a bank, and the resultant universal bank, may not help IDBI solve its NPA ... More

FIXED DEPOSITS

HUDCO: Shelter for seniors
HUDCO'S fixed deposit programme is suitable for risk-averse investors, especially senior citizens. Deposits of up to three years can be considered. The longer-end tenures can be avoided due to the lower incremental returns offered and a possible ... More

INTERVIEW

`No incentive to invest or save' — Mr Arun Kejriwal, Director, KRIS
EXTREMELY disappointed with the Finance Minister for hitting the middle classes hard, Mr Arun Kejriwal, Director, KRIS (Kejriwal Research and Investor Services), expects some rollback on dividend tax, a measure that is bound to ... More

COMMENTARY

Book profit in Hindustan Lever
ITC (Rs 755): As mentioned last week, a break above Rs 760 helped the scrip move towards the next resistance zone at Rs 780. However, ITC failed to settle above Rs 780. After edging up to Rs 782, the scrip turned weak on Friday. On ... More

Reliance upbeat
MARKETS across the country held their breath for the gala event of the year - Budget 2002-03. The coup de grace affected bourses on Thursday when the Budget delivered a stinging blow to trader's sentiments. After that, the week ended ... More

Pharma, FMCG scrips in the limelight
IT was a big week at the bourses. Obviously, the Budget for 2002-03 was slated to overshadow other developments during the week, especially in a tough year for Corporate India. Bogged down by the industrial slowdown, the Indian industry was ... More

Positive undertone in HPCL
AFTER a firm trend during the early part of the week, the market sentiment was dented on the Budget day. The violence that prevailed in Gujarat coupled with the market dissatisfaction with the Budget proposals led to a sharp drop of about 143 ... More

Nasdaq: Uptrend to continue
AFTER passing through a rough patch, the sentiment at the US bourses was particularly bullish during the week gone by. All the three-benchmark indices logged significant gains for with the broad based S&P 500 recording the highest weekly gain ... More

INCOME TAX

Hammered on rebate and dividends
The Budget has taken the sheen out of savings, especially for the salaried class, and imposed a higher tax burden on dividends received from mutual funds and companies. More

Guideline value for computing capital gains
Losses arising on the transfer of short-term capital asset may be set off against long-term capital gains and vice-versa. The loss, if any, which cannot be so set off shall be carried forward and set off against income under `capital gains'. More

Interest on housing loan
THE Finance Act 2001, with effect from April 1, 2002 provided that where property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the interest on such borrowed capital shall be allowed as a deduction from ... More

Returns and assessments
UNDER Section 139(1), every person whose income exceeds the maximum amount not chargeable to tax is required to furnish a return within the due dates stipulated by the Section. It is proposed to insert a new sub-section (1A). By virtue of this ... More

INSIGHT

Small savers slammed
IN KEEPING with expectations, the Finance Minister has tried to reduce the costs associated with small savings schemes. And initial indications are that he has been considerably successful. With the pruning of the rebate under Section 88 of the ... More

Which way to yield?
THE non-tax saving investment options among small savings schemes are still attractive, even after the change in yields. The Post Office Monthly Income Scheme (POMIS) offers a yield to maturity of 10.7 per cent after the drop in interest rates. ... More

Debt, equity, or...
THE relentless compression in the yields of debt securities over the past year or so has significant long-term consequences for an investor. The expected long-term return on debt is now under 10 per cent, even for maturities of 10-20 years. In ... More

With perks, tax-free salary is possible too
ONE does not have to take up a job with a company headquartered in the Bahamas or in Saudi Arabia to savour the satisfaction of a tax-free salary. A similar arrangement could well become the norm if Mr Sinha's Budget proposals are carried ... More

As India Inc is pampered: Savers sweat
THE policy framework is becoming so focussed on cutting interest rates without the necessary economic framework that it appears wholly dictated by the incessant demands of India Inc. Increasingly, things are becoming difficult for savers. The ... More

Allowing RIL to bid for IPCL -- Why the Govt is wrong
THE proposed merger of Reliance Petroleum with Reliance Industries is likely to ignite afresh the controversy over whether the latter should be permitted to bid for the privatisation of Indian Petrochemicals Corporation Ltd (IPCL). The Government ... More

RIGHTS ISSUES

SQL Star International: Avoid
SQL Star International is making a rights offer to part-finance the working capital requirements for its Indian operations and repayment of unsecured loans. This rights offer follows its initial public offering in June 1999 to part-finance its ... More

JIK Industries: Reject
JIK INDUSTRIES is offering 46.8 lakh cumulative convertible preference shares with a dividend of 12.75 per cent at a face value of Rs 100 each, with detachable warrants. This offer is on a rights basis to the company's equity shareholders in the ... More

CARTOON