D-Street unimpressed with interim Budget

Automobile stocks rise after govt announces tax stimulus

Dalal Street was far from impressed with the government’s interim Budget, which gave investors few reasons to be optimistic about India’s near-term prospects. Though India’s key stock indices ended firm on Monday, gains were capped as analysts and economists felt Finance Minister P Chidambaram’s announcements were populist, rather than steps to curb inflation and improve economic environment.

The surprise announcement of a cut in excise duty on automobile products sparked a rally in the shares of companies from the sector. But a portion of the gains fizzled out in the latter part of the day.

The BSE Sensex rose 0.5 per cent, or 97 points, over its previous close to end the day at 20,464 — the highest level this month. The NSE Nifty rose 0.4 per cent, or 25 points, to close at 6,073.

“It was clearly an election budget. The pre-election sweeteners, especially excise duty cuts, will make it difficult to meet the deficit target,” said Leif Lybecker Eskesen, HSBC’s chief economist for India & Asean.

Foreign institutional investors (FIIs), after selling to the tune of about Rs 900 crore so far in February, net-bought shares worth Rs 522 crore on Monday. Domestic institutions were net-sellers to the tune of Rs 245 crore.

“The Budget speech was more of a political speech, with the finance minister listing the current government’s achievements. He left it to the next government to deal with fiscal deficit,” said K R Choksey Securities Managing Director Deven Choksey.

Shares of auto makers rose, with Mahindra & Mahindra gaining about 2.8 per cent over the previous close. The Hero MotoCorp and Maruti scrips were up 1.9 and 1.4 per cent, respectively. The government slashed excise duty on capital and consumer goods, too, but the move did little to spark any excitement in these shares.

“These small excise cuts in the auto, capital goods and the consumer goods segments may have moved stocks on Monday but the larger problem these industries face is the lack of new projects and subdued demand among consumers,” said Dalton Capital Managing Director U R Bhat.