Capital goods stocks see mixed trend after reduction in excise duty

Key benchmark indices retained positive zone in afternoon trade after the Finance Minister P Chidambaram said fiscal deficit will be contained at 4.6% of GDP for the year ending 31 March 2014 (2013/14) and the current account deficit (CAD) will be contained at $45 billion in 2013/14. The barometer index, the S&P BSE Sensex, was up 64.77 points or 0.32%, up 92.64 points from the day's low and off 50.17 points from the day's high. The market breadth, indicating the overall health of the market was negative.

Index heavyweight and cigarette major ITC regained positive zone in volatile trade. Auto stocks gained in volatile trade after the finance minister announced reduction in excise duty on cars, commercial vehicles, sports utility vehicles (SUVs), motor cycles and scooters. PSU bank stocks declined after the Finance Minister said that the government has set aside Rs 11200 crore for capital infusion in public sector banks. Capital goods stocks were mixed after the Finance Minister said that with a view to stimulate growth in the capital goods and consumer non-durables, the excise duty will be cut to 10% from 12% on all goods falling under chapter 84 and chapter 85 of the Schedule to the Central Excise Tariff Act for the period up to 30 June 2014.

Finance Minister P Chidambaram said fiscal deficit will be contained at 4.6% of GDP for the year ending 31 March 2014 (2013/14). He added that current account deficit (CAD) will be contained at $45 billion in 2013/14. He said that the government and the RBI acted in tandem to curtail inflation. Food inflation is still the main worry, although it has declined sharply from a high of 13.6% to 6.2%, Chidambaram said.

India's merchandise exports are projected to expand 6.3% to $326 billion in 2013/14. However, imports are down, and this does not augur well for either manufacturing or domestic trade, the Finance Minister said. "Our aim must be robust growth in both exports and imports, with trade in balance over a period of time", the Finance Minister said.

The deceleration in investment in manufacturing is particularly worrying, the Finance Minister said. Consequently, there is no uptick yet in manufacturing, he said.

GDP growth in third and fourth quarters of FY 2014 will be at least 5.2% and FY 2014 growth rate will be 4.9%, the Finance Minister said. Chidambaram said that $15 billion will be added to foreign exchange reserves by the end of the fiscal year. Declining fiscal deficit, moderation of CAD, stable exchange rate and increase in project implementation is a result of hard work, he said.

Chidambaram expressed confidence that the economy is more stable today than what it was two years ago. At a time when it appeared that a number of projects would fail because of the logjam, the government took the bold step to set up the Cabinet Committee on Investment and the Project Monitoring Group, he said. Thanks to the swift decisions taken by them, by the end of January 2014, the way was cleared for completing 296 projects with an estimated project cost of Rs 660000 crore, the Finance Minister said.

The government will allocate Rs 2.24 lakh crore to defence sector in 2014/15, an increase of 10% over the Budget Estimate for 2013/14. The government will provide capital infusion of Rs 11200 crore in state-run banks in 2014/15. Total spending on food, fertiliser and fuel subsidies will be at Rs 2.46 lakh crore in 2014/15. This is higher than the revised estimate of Rs 2.45 lakh crore in 2013-14.

Chidambaram said that in keeping with the conventions, he does not propose to make any announcements regarding changes to the tax laws in the interim budget. The finance minister cut excise duty on cars, sports utility vehicles (SUVs) and two wheelers for the period up to 30 June 2014 so as to give relief to the automobile industry. The Finance Minister also announced reduction in excise duty from 12 percent to 10 percent on all goods falling under chapter 84 and chapter 85 of the Schedule to the Central Excise Tariff Act for the period up to 30 June 2014 with an intention to stimulate growth in the capital goods and consumer non-durables sectors.

The government has envisaged number of steps to deepen the Indian Financial markets, Chidambaram said.

The estimate of plan expenditure is Rs 555322 crore for 2014-15. Non-plan expenditure is estimated at Rs 1207892 crore. Fiscal deficit for 2014-15 is expected at 4.1% of GDP.

At 13:18 IST, the S&P BSE Sensex was up 64.77 points or 0.32% to 20,431.59. The index jumped 114.94 points at the day's high of 20,481.76 in early trade, its highest level since 13 February 2014. The index fell 27.87 points at the day's low of 20,338.95 in mid-morning trade.

The CNX Nifty was up 15.90 points or 0.26% to 6,064.25. The index hit a high of 6,079.35 in intraday trade, its highest level since 13 February 2014. The index hit a low of 6,038.30 in intraday trade.

The market breadth, indicating the overall health of the market was negative. On BSE, 1,367 shares dropped and 1,004 rose. A total of 178 shares were unchanged.

The total turnover on BSE amounted to Rs 889 crore by 13:20 IST.

Among the 30-share Sensex pack, 18 stocks rose and rest fell. Tata Power Company (up 4.4%), HDFC (up 2.11%) and Dr. Reddy's Laboratories (up 2.03%) edged higher from the Sensex pack.

Hindalco Industries (down 1.6%), Coal India (down 1.57%) and ONGC (down 0.74%) edged higher from the Sensex pack.

Index heavyweight and cigarette major ITC rose 0.56% to Rs 321.60. The stock hit a high of Rs 322 and low of Rs 317.80 so far during the day.

Auto stocks gained in volatile trade after the finance minister announced reduction excise duty.

M&M (up 1.25%), Maruti Suzuki India (up 0.9%), Bajaj Auto (up 0.18%), Hero MotoCorp (up 1.98%) and TVS Motor Company (up 2.18%) gained. Tata Motors (down 0.68%) and Ashok Leyland (down 2.56%) declined.

The Finance Minster announced cut in excise duty for large cars to 24% from 27% and for mid-segment cars to 20% from 24%. Excise duty on small cars, two-wheelers and commercial vehicles was cut to 8% from 12%.

PSU bank stocks declined after the Finance Minister said that the government has set aside Rs 11200 crore for capital infusion in public sector banks.

State Bank of India (SBI) (down 0.46%), Punjab National Bank (down 1.74%), Bank of Baroda (down 1.18%), Bank of India (down 1.93%) and Union Bank of India (down 0.73%) dropped.

IFCI rose 1.1%. Finance Minister P. Chidambaram in the interim budget for 2014-15 presented today, 17 February 2014 announced that the government will set up Rs 200 crore venture fund with IFCI.

Capital goods stocks were mixed after the Finance Minister said that with a view to stimulate growth in the capital goods and consumer non-durables, the excise duty will be cut to 10% from 12% on all goods falling under chapter 84 and chapter 85 of the Schedule to the Central Excise Tariff Act for the period up to 30 June 2014. Bharat Heavy Electricals (Bhel) (down 0.81%), BEML (down 0.08%), Crompton Greaves (down 3.23%), Siemens (down 0.6%) declined.

Thermax (up 2.01%), ABB (up 0.63%), Bharat Electronics (up 0.63%), L&T (up 0.06%) gained.

PSU OMCs declined. HPCL (down 1.38%), Indian Oil Corporation (IOC) (down 0.54%) and BPCL (down 073%) edged lower.

In the interim budget announced today, 17 February 2014, finance minister P. Chidambaram provided Rs 65000 crore for fuel subsidy for the year ending March 2015 (FY 2015). The government, this year, absorbed the rollover of Rs 45000 crore from the fourth quarter of 2012-13 and it will rollover only Rs 35000 crore from the fourth quarter of this year into the next year, Chidambaram said in the budget speech today, 17 February 2014.

The objective of a Vote-on-Account is to get Parliament's nod for expenditure to be incurred in the months prior to elections.

The next full-fledged budget will be presented by the new government which comes to power after the Lok Sabha polls in April-May 2014.

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