Budget 2011: Reliefs in Taxes

The Union Budget for 2011-12 presented by Finance Minister Pranab Mukherjee to Parliament on Monday is widely seen as taxpayer- and market-friendly. While it provides tax relief to individual taxpayers and corporate assessees, it has also sought to avoid any across-the-board increases in excise and service taxes – as was widely expected following suggestions from the Prime Minister’s Economic Advisory Council. The Council had said recently that the time was ripe to withdraw the fiscal stimulus of 2008-10.

But the Finance Minister apparently disagrees. He said: "In my last Budget, I had started rolling back the fiscal stimulus implemented over 2008-09 and 2009-10 to mitigate the impact of the global financial crisis on the economic slowdown in India. In the course of the year, I have moved further on that path. I believe that a part of the current recovery must be stored away to build future resilience. Indeed, a counter-cyclical fiscal policy is our best insurance against external shocks and localised domestic factors."

So, Mukherjee is obviously not sure that growth will remain robust if he tightens the screws just now. The main highlights of his budget proposals are the scattering of reliefs here and there, with the big sting being left for later. The following are the main budget proposals, and their possible impact.

* The surcharge on corporate tax on domestic companies will be cut from 7.5% to 5%.  However, the Minimum Alternate Tax goes up to 18.5% from 18% to keep the effective level of taxation for MAT companies the same. Companies will welcome the relief.

*  Individual taxpayers get a higher basic deduction of Rs 1.8 lakh; every taxpayers get minor relief of Rs 2,000. It’s a minor drop in the bucket given the ravages of inflation.

* Senior citizens get a bonanza. Apart from an increase in the exemption limit to Rs 2.5 lakh, the entitlement age for senior citizens is now 60, not 65. A new class of super senior citizens aged above 80 gets an even higher IT exemption limit of Rs 5 lakh. For a young country, Pranab, 76, is obviously rooting for senior citizens.

 * Service tax stays at the same level as before at 10%, but several new services have been brought within its ambit. Among them: hotels with tariffs above Rs 1,000 (5% service tax), restaurants with bar and A/C (3%), hospitals with more than 25 beds and with A/C (5%), and air travel (Rs 50 more for domestic, Rs 250 for international). Business class air travel will attract a full 10% service tax. Hotels, five-star restaurants and airlines will scream.

* The base excise rate stays at 10%, but exemptions on some 130 items are being withdrawn. A basic rate of 1% is being levied. Another 240 items that are still exempt will be attracting tax when the goods and services tax is introduced next year. One can expect inflation to get a nudge up.

* Inflation, reforms and black money generation got some mention, but nothing substantive. The amnesty scheme for bringing back black money was missing in the budget. The government is obviously not keen to be seen as reactive to public criticism of corruption.

* Subsidies on fertiliser, kerosene and cooking gas (LPG) will be cash-based by March, 2012. No measures on fuel deregulation were, however, announced. The urea subsidy will soon become nutrient-based. Good in intent, a lot will depend on political will. One can expect the Left to be critical of the proposal.

*  The public sector disinvestment target has been upped to Rs 40,000 crore in 2011-12; the current fiscal’s target was reduced to 22,144 crore due to higher realisations from other sources. But it could be because of the government’s inability to reform oil prices. While Indian Oil was forced to review its further public offer due to losses, ONGC’s plans appear to have been delayed. A lot will depend on how the market fares after the budget.

*  Foreign institutional and non-institutional investors get more options for investment. While the total ceiling on debt is raised to US$40 billion, individual investors who are KYC (know-your-customer) complaint can invest in Indian mutual funds. This could indirectly give a fillip to market sentiment. Positive for market sentiment, but don’t expect a flood of foreign funds to come into equity.

*  Many sops for infrastructure have been announced. While Rs 30,000 crore worth of tax-free bonds will be on offer next year, the Rs 20,000 additional tax deduction available for investing in infra bonds will be retained for another year. Nothing earth-shattering in all this.

*  Small sops have been offered to housing, especially low-cost housing. The 1% interest rebate will be applicable for loans upto Rs 15 lakh on houses costing upto Rs 25 lakh. Loans upto Rs 25 lakh will qualify as priority sector loans (against Rs 20 lakh now). One cannot expect any major fillip to housing with this. Realty is already beyond reach in most metros even for the middle class.

Overall, the centre’s direct tax reliefs will cost Pranab Mukherjee Rs 11,500 crore, while his indirect tax levies will bring in Rs 11,300 crore. The fiscal deficit will be contained at 4.6% next year against 5.1% this year, with the 2013-14 target being 3.5%.

TAX IMPACTS & KEY ISSUES: BUDGET 2011

• Corporate tax surcharge reduced from 7.5% to 5%. Minimum alternate tax rate up from 18% to 18.5%.
• IT exemption for taxpayers raised from Rs 1.6 lakh to Rs 1.8 lakh. Tax relief is about Rs 2,000 across-the-board.
• Senior citizens to get higher IT deduction limit of Rs 2.5 lakh. Entitlement age reduced to 60 from current 65
• New category of senior citizens above 80 years to get higher IT deduction limit of Rs 5 lakh from this year
• Service tax levels and excise stay at 10%; Peak rate of customs duty remains unchanged
• Excise exemptions withdrawn on 130 items; to pay minimum excise of 1% from next year
• Foreign individual investors allowed to invest directly in mutual funds subject to KYC requirements
• Govt to allow issue of Rs 30,000 crore worth of tax-free bonds by infrastructure companies in 2011-12
• Tax deduction for investment in infrastructure bonds of Rs 20,000 extended for one more year
• Investment in fertiliser plants and machinery to be treated as infrastructure investment
• Fiscal deficit for 2010-11 seen at 5.1% against 5.5% budgeted; deficit for 2011-12 projected at 4.6% of GDP
• Government to introduce direct cash payments for those entitled to subsidies in kerosene, cooking gas and fertiliser by March, 2012.
• Government considering extension of nutrient-based subsidy for urea, the largest chunk of fertilisers used in agriculture
• National mission for electric and hybrid vehicles to be set up to create environment-friendly automobiles
• Priority sector home loans limit raised to Rs 25 lakh from Rs 20 lakh.
• Interest subvention on home loans up to Rs 15 lakh. Mortgage risk guarantee corporation to insure loans to the poor
• Public sector disinvestment target for 2011-12 is raised to Rs 40,000 crore
• Centre's net borrowing figure for 2011-12 fixed at Rs 3,43,000 crore; fiscal deficit figure at Rs 4,12,000 crore
• Cement excise duties will be shifted to valorem basis from specific duty now
• Loss on direct tax reliefs at Rs 11,500 crore; gain on indirect tax changes at Rs 11,300 crore
• FM says no need to remove stimulus package at this stage, but will withdraw excise exemptions

Personal Tax exemption limit raised by Rs 20,000

New tax slabs:

Slabs (Rs)	Rate
1,80,000	Nil
1,80,000-5,00,000	10
5,00,000-8,00,000	20
8,00,001	30

Old tax slabs:

Slabs (Rs)	Rate
0 - 160000	0
160001 - 500000	10
500001 - 800000	20
800001 and above	30

Female individual taxpayer
New tax slabs:

Slabs (Rs)	Rate
upto 1,90,000	0
1,90,000-500000	10
500001-800000	20
800001 and above	30

 Old tax slabs:

Slabs (Rs)	Rate
0 - 190000	0
190001 - 500000	10
500001 - 800000	20
800001 and above	30

Senior Citizens
New tax slabs:

Slabs (Rs)	Rate
upto 250000	0
250000-500000	10
500001-800000	20
800001 and above	30

 Old tax slabs:

Slabs (Rs)	Rate
0 - 240000	0
240001 - 500000	10
500001 - 800000	20
800001 and above	30

Latest Updates of Union Budget 2011-12

Here are the latest updates:

* MF can accept subscription foreign investors who meet KYC norms
* Discussions underway to relax FDI policy
* To introduce Public Debt AMC of India Bill in FY12
* Divestment in FY12 seen at Rs 40000cr
* Preparations for GST rollout in final stages
* Will introduce GST Bill in current session
* Govt will move to direct transfer of fertiliser subsidy to cos
* Extension of NBS to cover urea under review
* Significant progress on the GST network
* Direct Tax Code will be effective April 1, 2012
* New Public debt mgmt bill to be introduced in Parliament soon
* DTC will be finalised in 2011
* Govt in the process of setting up independent debt managing committee within finance ministry
* Average inflation and current account deficit to be lower and better managed next yr
* Expect inflation and CAD to be lower in 2011-2012
* Current account deficit poses concerns due to its composition
* Exports grown by 29.4%; imports grown by 17.6%
* Current account deficit at 2009-10 levels
* Impact of monetary tightening to show up with a lag
* Huge differences between wholesale and retail prices not acceptable
* Expect RBI to moderate inflation in coming months
* Shortfalls in distribution and marketing systems in food
* Economy has shown resilience to external and internal shocks
* Consumers have been denied a seasonal fall in food prices

Sensex 100 points up ahead of Budget

The Sensex added 100 points ahead of Union Budget 2011-12 today, supported by financial, oil & gas, infrastructure, technology and metal companies' shares. However, auto and cement companies' shares were seeing selling pressure.

The 30-share BSE Sensex was trading at 17,807, up 107 points and the 50-share NSE Nifty gained 36 points at 5,339.

The breadth was positive - about 820 shares advanced while 272 shares declined on National Stock Exchange.

Experts were expecting some news on banking license, FDI in retail and fertiliser subsidy.

National Fertilisers, IVRCL Infra, IDFC, Pantaloon Retail and LIC Housing Finance were on buyers' radar.

Budget 2011: Focus areas

The Finance Minister Pranab Mukherjee will present the Union Budget 2011 today. He has a tough role to play as the country is reeling under inflation and high crude price has been a dampener. The major focus areas of the budget are likely to be:

* Fiscal Deficit: The market is talking about FY12 deficit of 5-5.5% but watch out for absolute figure as gross domestic product (GDP) has been revised from Rs 60 lakh crore to Rs 90 lakh crore. Hence, fiscal deficit absolute number can come at Rs 4.5 lakh crore instead of Rs 3 lakh crore even if the fiscal deficit is at 5%.

* Market Borrowing: The government could announce market borrowings of around Rs3.8 trillion (USD80 bn) - 4.5% of GDP, compared to a projected Rs 3.45 trillion (USD76 billion) in FY11, as the one-off telecom receipts are not available in FY12. Revenue growth to slow on lower tax buoyancy and no asset sale windfall is expected.

* Clarity on GST and DTC

* On taxation side: Some broad basing of the service tax, higher income tax exemptions, and a possible increase in excise duties on autos is expected.

* Sectors: The metals and capital goods industry is looking for an increase in import duties to protect domestic manufacturers. IT has asked for continuation of the STPI benefits, while oil companies have asked for a reduction in excise and customs duties. Real-estate companies have asked for tax sops for low-cost housing. Except for the sop to low-cost housing, other measures seem unlikely. In an attempt to boost tax revenues the government may focus on:
1) Increasing taxes on its favourite targets - cigarettes, alcohol, high-end consumer durables
2) Widening the services tax net
3) Rationalising excise duties by reducing exemptions or carve-outs (eg, small cars)
4) Introduction of cess to fund social sector schemes can not be ruled out

Railway Budget

Union Railway Minister Mamata Banerjee, while presenting her third Rail budget, not only kept fares and freight rates untouched, but also promised to invest Rs 57,630 crore (USD 12.68 billion) in the network in the financial year 2011/12. As expected, she barely attended to the mounting deficit of the transportation institution and instead yielded to gimmicks that befits a politician eyeing the polls—in this case, the West Bengal Assembly.

While announcing her Railway Budget, Ms Banerjee said she was optimistic that financial health of the Railways will be revived by FY12. "We will see Rs 5,260 crore savings in FY12,". Where, on one hand, Banerjee left passenger fares untouched and reduced AC booking charges from Rs 20 ro Rs 10. She also announced 85 proposals for PPP and okayed launch of nine new Duranto and three Shatabdi trains. For Mumbai, she proposed  raising capacity to 107 local trains.  (See Highlights)

The budget comes at a time when the railways are facing financial crunch with its operating ratio inching close to the 100-level mark. The Railway administration, which is coping with gloomy numbers has to deal with task of delivering what Laloo Prasad Yadav promised in his stint as the Railway Minister.

Despite populist meaures, Railway budget 2011 was a sheer disappointment for the markets. All railway stocks have reacted to the miserable announcement. Despite announcement of steps on anti-collision, Kernex Microsystems has failed to pick up.

Amongst the other populist measures announced by Mamata Banejee include a target of adding 700 km of annual rail line as compared to the current 150 km, to set up new coach factory at Kolar via PPP or JV and to set up additinal wagon units in Kerala via JV.

Rail Budget 2011

With just few hours to go for the Railway Budget, we examine the state of the railways, the challenge facing the railway's minister and the future prospects for this institution.

CNBC-TV18’s Karan Thapar discusses the issue with the Former Chairman of the Railway Board, Satish Vaish; Director, International Relations at the Asian Institute of Transport Development, Sumant Chak and Indian Railways’ Professor at Indian Institute of Management (IIM) Ahmedabad, Professor G Raghuram.

Few weeks back there was news that the expenditure has gone up by Rs 1,330 crore whilst earnings are down by Rs 1,142 crore taking the next deficit to Rs 2,500 crore.

According to Vaish, it is not at all serious because this deficit depends upon so many factors which are not under control of the railway. “The important thing to watch is that the railway does not throttle the economy. The factors, which have come in, like increase in diesel price, inflation, disturbances, all these things will continue, I don't think we can change them. We have to earn more and we have to do some big things,” he adds.

However, Chak says, it is certainly a cause for worry. “What is scary is the long-term scenario, which you see on the railways, because it will tend to throttle the economy. If economy grows at a particular rate, the transport demand grows almost 1.25 times that. With the gross domestic product (GDP) growth being pegged at 9%, the railway should grow at about 12-13%, which they are not. Not only that, you don't see any capacity being created for the railway to carry additional traffic,” he adds.

Nifty ends lower as oil hits $ 96/bbl

Indian equity continued the downtrend for second consecutive session on the back of fall in European markets and further rise in crude oil prices. The Nifty ended below the 5450 level on Wednesday, pulled down by financial, infrastructure, realty and technology companies' shares.

Crude oil inched up by 2.5% to USD 96.08 a barrel today - highest level since October 2008 - on growing fears that unrest in Libya could spread to other top oil producers in the region and cut more output.

Violent clashes in Libya have resulted in at least three oil companies halting output in Africa's third-largest producer, which pumps 1.6 million barrels per day (bpd), or nearly 2 percent of global supply.

"The Libyan situation has just highlighted the concern for the entire Gulf region. As we have seen this contagion spread from Tunisia to Egypt to Libya and now to Bahrain and Dubai and other areas of influence which are now coming under the concern of the people’s revolution. It is more of a concern for the entire area and the potential that this could escalate, which is the concern and why people are actually building in this Middle Eastern premium," Jonathan Barratt, the Managing Director of Commodity Broking Services said.

International Energy Agency (IEA) executive director Nobuo Tanaka said that sustained oil prices over USD 100 per barrel for the rest of the year could tip the global economy back into a repeat of the 2008 economic crisis.

European markets also slipped half a percent to one percent, at the time of closing of Indian equities. The 30-share BSE Sensex fell 118 points, to settle at 18,178 and the 50-share NSE Nifty dropped 32 points, to end at 5,437.

However, Anil Dhirubhai Ambani Group (ADAG), auto and cement companies' shares limited the losses. Heavyweights Reliance Industries and HDFC gained one percent.

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Key Features of Budget 2010-2011

CHALLENGES
• To quickly revert to the high GDP growth path of 9 per cent and then find the means to cross the ‘double digit growth barrier’.
• To harness economic growth to consolidate the recent gains in making development more inclusive.
• To address the weaknesses in government systems, structures and institutions at different levels of governance.

OVERVIEW OF THE ECONOMY
• India among the first few countries in the world to implement a broad-based counter-cyclic policy package to respond to the negative fallout of the global slowdown.
• The Advance Estimates for Gross Domestic Product (GDP) growth for 2009-10 pegged at 7.2 per cent. The final figure expected to be higher when the third and fourth quarter GDP estimates for 2009-10 become available.
• The growth rate in manufacturing sector in December 2009 was 18.5 per cent – the highest in the past two decades.
• A major concern during the second half of 2009-10 has been the emergence of double digit food inflation. Government has set in motion steps, in consultation with the State Chief Ministers, which should bring down the inflation in the next few months and ensure that there is better management of food security in the country.

CONSOLIDATING GROWTH
Fiscal Consolidation
• With recovery taking root, there is a need to review public spending, mobilize resources and gear them towards building the productivity of the economy.
• Fiscal policy shaped with reference to the recommendations of the Thirteenth Finance Commission, which has recommended a calibrated exit strategy from the expansionary fiscal stance of last two years.
• It would be for the first time that the Government would target an explicit reduction in its domestic public debt-GDP ratio.


Tax reforms
• On the Direct Tax Code (DTC) the wide-ranging discussions with stakeholders have been concluded – Government will be in a position to implement the DTC from April 1, 2011.
• Centre actively engaged with the Empowered Committee of State Finance Ministers to finalize the structure of Goods and Services Tax (GST) as well as the modalities of its expeditious implementation. Endeavour to introduce GST by April, 2011


Fertilizers subsidy
• A Nutrient Based Subsidy policy for the fertilizer sector has been approved by the Government and will become effective from April 1, 2010.
• This will lead to an increase in agricultural productivity and better returns for the farmers and overtime reduce the volatility in demand for fertilizer subsidy and contain the subsidy bill.

Petroleum and Diesel pricing policy
• Expert Group to advise the Government on a viable and sustainable system of pricing of petroleum products has submitted its recommendations.
• Decision on these recommendations will be taken in due course.

Improving Investment Environment
Foreign Direct Investment
• Number of steps taken to simplify the FDI regime.
• Methodology for calculation of indirect foreign investment in Indian companies has been clearly defined.
• Complete liberalization of pricing and payment of technology transfer fee and trademark, brand name and royalty payments.

Banking Licences
• RBI is considering giving some additional banking licenses to private sector players. Non Banking Financial Companies could also be considered, if they meet the RBI’s eligibility criteria.

Public Sector Bank Capitalization
• Rs.16,500 crore provided to ensure that the Public Sector Banks are able to attain a minimum 8 per cent Tier-I capital by March 31, 2011. Recapitalization of Regional Rural Banks (RRB)
• Government to provide further capital to strengthen the RRBs so that they have adequate capital base to support increased lending to the rural economy.

Corporate Governance
• Government has introduced the Companies Bill, 2009 in the Parliament to replace the existing Companies Act, 1956, which will address issues related to regulation in corporate sector in the context of the changing business environment.


Exports
• Extension of existing interest subvention of 2 per cent for one more year for exports covering handicrafts, carpets, handlooms and small and medium enterprises.
Agriculture Growth
• Government will follow a four-pronged strategy, covering
• Rs. 400 crore provided to extend the green revolution to the eastern region of the country comprising Bihar, Chhattisgarh, Jharkhand, Eastern UP, West Bengal and Orissa.
• Rs. 300 crore provided to organize 60,000 “pulses and oil seed villages” in rain-fed areas during 2010-11 and provide an integrated intervention for water harvesting, watershed management and soil health, to enhance the productivity of the dry land farming areas.
• Rs. 200 crore provided for sustaining the gains already made in the green revolution areas through conservation farming, which involves concurrent attention to soil health, water conservation and preservation of biodiversity.
• Government to address the issue of opening up of retail trade. It will help in bringing down the considerable difference between farm gate, wholesale and retail prices.
• Deficit in the storage capacity met through an ongoing scheme for private sector participation – FCI to hire godowns from private parties for a guaranteed period of 7 years.
Infrastructure
• Rs 1,73,552 crore provided for infrastructure development which accounts for over 46 per cent of the total plan allocation.
• Allocation for road transport increased by over 13 per cent from Rs. 17,520 crore to Rs 19,894 crore.
• Rs 16,752 crore provided for Railways, which is about Rs.950 crore more than last year.

India Infrastructure Finance Company Limited (IIFCL)
• IIFCL’s disbursements are expected to touch Rs 9,000 crore by end March 2010 and reach around Rs 20,000 crore by March 2011.
• IIFCL has refinanced bank lending to infrastructure projects of Rs. 3,000 crore during the current year and is expected to more than double that amount in 2010-11.
• The take-out financing scheme announced in the last Budget is expected to initially provide finance for about Rs. 25,000 crore in the next three years.

Energy
• Plan allocation for power sector excluding RGGVY doubled from Rs.2230 crore in 2009-10 to Rs.5,130 crore in 2010-11.
• Government proposes to introduce a competitive bidding process for allocating coal blocks for captive mining to ensure greater transparency and increased participation in production from these blocks.
• A “Coal Regulatory Authority” to create a level playing field in the coal sector proposed to be set up.
• Plan outlay for the Ministry of New and Renewable Energy increased by 61 per cent from Rs.620 crore in 2009-10 to Rs.1,000 crore in 2010-11.
• Solar, small hydro and micro power projects at a cost of about Rs.500 crore to be set up in Ladakh region of Jammu and Kashmir.

INCLUSIVE DEVELOPMENT
• The spending on social sector has been gradually increased to Rs.1,37,674 crore in 2010-11, which is 37% of the total plan outlay in 2010-11.
• Another 25 per cent of the plan allocations are devoted to the development of rural infrastructure.
Education
• Plan allocation for school education increased by 16 per cent from Rs.26,800 crore in 2009-10 to Rs.31,036 crore in 2010-11.
• In addition, States will have access to Rs.3,675 crore for elementary education under the Thirteenth Finance Commission grants for 2010-11.
Health
• An Annual Health Survey to prepare the District Health Profile of all Districts shall be conducted in 2010-11.
• Plan allocation to Ministry of Health & Family Welfare increased from Rs 19,534 crore in 2009-10 to Rs 22,300 crore for 2010-11.

BUDGET ESTIMATES 2010-11
• The Gross Tax Receipts are estimated at Rs. 7,46,651 crore
• The Non Tax Revenue Receipts are estimated at Rs. 1,48,118 crore.
• The net tax revenue to the Centre as well as the expenditure provisions in 2010-11 have been estimated with reference to the recommendations of the Thirteenth Finance Commission.
• The total expenditure proposed in the Budget Estimates is Rs. 11,08,749 crore, which is an increase of 8.6 per cent over last year.
• The Plan and Non Plan expenditures in BE 2010-11 are estimated at Rs. 3,73,092 crore and Rs. 7,35,657 crore respectively. While there is 15 per cent increase in Plan expenditure, the increase in Non Plan expenditure is only 6 per cent over the BE of previous year.
• Fiscal deficit for BE 2010-11 at 5.5 per cent of GDP, which works out to Rs.3,81,408 crore.
• Taking into account the various other financing items for fiscal deficit, the actual net market borrowing of the Government in 2010-11 would be of the order of Rs.3,45,010 crore. This would leave enough space to meet the credit needs of the private sector.
• The rolling targets for fiscal deficit are pegged at 4.8 per cent and 4.1 per cent for 2011-12 and 2012-13, respectively.
• Against a fiscal deficit of 7.8 per cent in 2008-09, inclusive of oil and fertilizer bonds, the comparable fiscal deficit is 6.9 per cent as per the Revised Estimates for 2009-10.
• Conscious effort made to avoid issuing bonds to oil and fertilizer companies. Government would like to continue with this practice of extending Government subsidy in cash, thereby bringing all subsidy related liabilities into Government’s fiscal accounting.

Service Tax
• Rate of tax on services retained at 10 per cent to pave the way forward for GST.
• Certain services, hitherto untaxed, to be brought within the purview of the service tax levy. These to be notified separately.
• Process of refund of accumulated credit to exporters of services, especially in the area of Information Technology and Business Process Outsourcing, made easy by making necessary changes in the definition of export of services and procedures.
• Accredited news agencies which provide news feed online that meet certain criteria, exempted from service tax.
• Proposals relating to service tax are estimated to result in a net revenue gain of Rs 3,000 crore for the year.
• Proposals on direct taxes estimated to result in a revenue loss of Rs. 26,000 crore for the year. Proposals relating to Indirect Taxes estimated to result in a net revenue gain of Rs.46,500 crore for the year. Taking into account the concessions being given in the tax proposals and measures taken to mobilize additional resources, the net revenue gain is estimated to be Rs. 20,500 crore for the year.
And many more points........

Budget Expectations 2011

Strong signals: 3G auction at a big premium to help narrow down fiscal deficit (even though one time revenue). Revenue collections from direct and indirect taxes from 2010-11 so far are buoyant and exceeding expectations. Economic growth vibrant with revised GDP growth at 8%. Domestic demand robust partially insulating us from the global anxieties on various fronts.

Expectations:

Direct taxes:

a) Personal income tax-No new relief/raising of exemption limit expected. This will be done with more changes in next year along with implementation of Direct tax code. Salaried employees may be exempted from filing IT returns.

b) Relief scheme for individuals to promote savings & investment particularly related to Real estate/Infrastructure.

c) Expectation on corporate taxation to be reduced by 5%-(may not materialize) along with removal of surcharge and cess.

d) Amnesty scheme to unearth black money and bring them back to IT net very much likely.

Indirect taxes:

a) Service tax may be amplified to cover new areas.

b) Excise duty net may be widened to cover SME”s who are exempt now. This may have some price impact in daily items used by common man.

c) Review of excise duty or petroleum/petroleum products due to rising crude prices.

Sectoral view:

• Power Sector will be the priority of the government to enhance capacities. Structured reforms to be introduced to attract investments and increase productivity. Green power sector will be encouraged with subsidies to ensure viability.

• Automobile sector is already under margin pressure. The rise in interest rates on bank lending may have impact on growth negatively. Fresh levies will dampen sentiments.

• PORT Developments at various new locations will be encouraged including public private partnership to handle increased traffic of goods and materials efficiently.

•  Infrastructure: Infrastructure is a capital intensive industry. Government spending and support is substantially required to improve the overall infrastructure in the country. The provisions required are to be at least doubled to cater to the development process. Expectation of NBFC and banks being allowed to raise Infrastructure bonds could help the situation.

Public – Private partnership to be encouraged to make the sector more vibrant and to complete the infra projects on time.

• Real Estate Sector – Housing may be considered on PRIORITY and for the first dwelling unit the Government can give relief in Interest rates through Banks (a small percentage) to continue the growth in this sector. More reforms to regulate the real estate sector are also expected.

• Telecom Sector – This sector has already shown phenomenol development in revenue contribution as also technology development. This is likely to continuefor the next few years.

• Agriculture – Could be one of the top priorities of the budget. Supports for various agricultural products and their effective public distribution system are likely to be announced in the budget. This is very critical to contain price of the various food Items and making them available at reasonable prices.

Reforms :

a) Increasing the FDI limit to 49% in Insurance sector from the current level could be brought about in this budget.

b) Highlights on the implementation of the GST (Goods and Service Tax) and DTC (Direct Tax Code) will be discussed in this budget.

c) New reforms on Public Distribution system may be announced.

Areas of Concern:

Continuous Uproar on 2G Auction and non functioning of Parliament during the entire winter session. This could blurt the importance on Budget presentation this year.


Crude Oil prices again reaching 100 USD per barrel could put the Government on Severe strain on Subsidies not provided for to that extent.

Higher inflation causing a great concern and regulatory measures of RBI could stagnate Growth.

Rising food and fuel prices are affecting the common man to a great extent and is a big drain on their savings.

Government will be forced to increase expenditure in Education, Healthcare, Food, Infrastructure , etc. There will be other social welfare schemes as well which will increase Government expenditure substantially.

Budget_Expectations_Bonanza_090211.pdf

Alert

For Cricketer Lovers. Watch Live (Cricket World Cup-2011) on this blog on 19/2/2011 at 2.00 pm onwards.

ADAG Stocks Dip

A day after the CBI questioned ADAG chairman Anil Ambani in connection with the 2G spectrum fiasco, the company's stocks took a beating on the bourses. Although ADAG group issued a statement saying that Anil Ambani was not 'summoned' by the CBI and that it was just part of Delhi visit, the sentiment for ADAG stocks remained subdued in morning trade.
Read more - Anil Ambani at CBI HQ for 2G probe

ADAG stock prices at 9.27 AM
Reliance Infrastructure was quoting at Rs 631.00, down Rs 0.65, or 0.10%.
Reliance Capital was trading at Rs 471, down Rs 5.40, or 1.13%
Reliance Communications dwindled to Rs 99.00, down Rs 0.60, or 0.60%
Reliance Broadcast Network hit Rs 69.50, down Rs 1.00, or 1.42%
Reliance Power was quoting at Rs 120.35, down Rs 1.40, or 1.15%
Reliance MediaWorks slipped to Rs 154.00, down Rs 1.90, or 1.22%.

Nifty Flat

The Nifty was quiet in opening trade today, with a positive bias. Asian markets too were trading with marginal gains. Metal, oil & gas and select financials were on buyers' radar while ADAG, realty and private bank stocks were under pressure.

Tata Steel gained 2% after 1.5% fall in initial trade, as the company's Q3 consolidated net profit was up by 122% at Rs 1,003 crore on year-on-year basis but EBITDA margin was at 11.6% as against 13% in same quarter the last year. Raw material costs increased at Rs 10,270 crore versus Rs 8,030 crore, YoY.

Among frontliners, DLF, SAIL, Reliance Capital, Reliance Power, Reliance Infrastructure, IDFC, Tata Motors, Axis Bank, HDFC and ICICI Bank were witnessing selling pressure.

However, L&T, Tata Power, BPCL, Infosys, TCS, ITC and HUL were supporting the markets.

At 9:17 hours IST, the 30-share BSE Sensex was trading at 18,314, up 40 points and the 50-share NSE Nifty rose 8 points to 5,489.

However, the Nifty February futures were trading at 9 points discount. The CNX Midcap fell just 10 points at 7,730.

Midcap & Smallcap space:

Hexaware shot up 5% as its adjusted net profit increased 135.7% at Rs 39.6 crore in fourth quarter of CY10 versus Rs 16.8 crore in previous quarter.

MIC Electronics and Thomas Cook were up 5% each. Escorts was up 2.5%.

M&M Financial up 1% as the compnay launched QIP worth Rs 426 crore, according to sources.

Intraday Trading

What Is Intraday Trading?
Intraday trading, often just "day trading" buy and sell financial products on the same day practice. It is often mentioned in relation to the stock market, but you can make many other types of day trading the financial vehicles. This is a high energy field, which is quite vulnerable, but also offers significant profit opportunities. Successful day trader can make a life good and consistent.

First of all, every morning the Indian always SGX Nifty on Singapore Stock Exchange on news of the investors will be opened before Indian market for trading business. SGX Nifty is trading at what level the Indian stock market giving a likely development if they are open for business on some information.

Secondly, the technical analysts to watch and to hear their views on the Nifty intraday market and finally, if the financial advisors through telephone or Internet or SMS alerts are checking with your spare time may be. Nifty movement to the whole thing sums up how important markets. Intraday Trading Strategies India.

Choose your Stocks
Intraday trading can be done only after you choose your stocks carefully. It is important that you follow the basic rules of day trading while choosing your stocks. As a beginner, you should avoid day trading in risky stocks. You can concentrate on stocks of sectors such as banking, automobiles or information technology, as these stocks have the capacity to bounce back even after a steep fall. Many knowledgeable people will advise you to stay away from penny stocks for day trading, since a lot of volatility is seen in their price movements without any fundamental reasons.

Book Profits in Time
We enter the stock market to make profits and not to lose our money. So, when you think that you are getting good returns in the day's trade, you should immediately quit your position. Don't have over ambitious targets for your stocks and be aware of the reality for your own benefit.

Importance of Stop Losses
Stop losses are an important part of intraday trading. Stop losses help you to protect any unwanted losses in the day trading procedure. They are the best ways to book profits at the right levels and emerge as a winner even in fluctuating stock markets. For a trader going short on weak stocks, the stop loss point would be above his purchase price.

Nifty Down after 2-day rally

The benchmark Nifty was flat with a positive bias in opening trade amid a choppy trade. The index was consolidating at around previous closing value after a rally seen in previous two days.

Equities are likely to be the best performing asset in the coming decade, says Ridham Desai of Morgan Stanley. "We expect the Sensex to deliver annual returns of 15.3% over the next 10 years. Our view is that the risk-reward ratio for Indian equities will make it the most attractive asset class in the coming decade. We believe that Indian equity returns are likely to be less volatile in the coming decade than in the previous 10 years," he explained.

Among frontliners, ACC, Ambuja Cements, Tata Motors, Bajaj Auto, GAIL, Tata Steel (ahead of numbers), L&T and BHEL were on buyers' radar.

However, Reliance Communications, M&M, HDFC, Jaiprakash Associates, Dr Reddy's Labs, ONGC, Infosys, TCS, Bharti Airtel and Reliance Communications were witnessing selling pressure.

At 9:17 hours IST, the 30-share BSE Sensex was trading at 18,266, up 65 points and the 50-share NSE Nifty rose 14 points to 5,470.

The CNX Midcap went up 11 points to 7,727 and the Nifty Junior gained 24 points at 10,823. About 638 shares advanced as against 253 shares declined on National Stock Exchange.

Midcap & Smallcap space:

Results reaction: Amtek Auto was up 3% while Ispat, Jubilant Life, Deccan Chronicle and Unitech lost 2-4%.

Escorts rose 3% and TVS Motors was up 0.8%. IOB gained 5%.

Reliance Broadcast and Videocon Industries were up 2.5% each.

However, Sun TV lost 3%. HDIL, Reliance Capital and Ashok Leyland fell 0.5%.

Share Market Tips

What is Nifty and how trading ?

1. Nifty (S&P CNX Nifty) Sensex on BSE (Bombay Stock Exchange) and NSE (National Stock Exchange), the Indian stock market index
2. Trading is done on Nifty contract which is also called as Nifty future derivative. Nifty derivative movement is based on Nifty index.
3. Nifty Lot Size - Nifty derivative consist of a lot of 50 quantities of Nifty. So if you want to buy Nifty contract then you have to buy at least one lot. The trading in Nifty contract is done in lots. Small traders can even buy Mini lot of Nifty contract which consist of 20 quantities of Nifty.
4. Nifty Expiry - The Nifty derivative expires every last Thursday of the month. In India we have three month future derivatives for trading. For example - In the month of October, we have October, November and December month Nifty derivative for trading. Current month derivative will have more liquidity (more volumes) as compared to other two months derivatives. A new contract is introduced on the trading day following the expiry of the current month contract. If the last Thursday is a holiday then contracts expire on the previous trading day.
5. Based on your trading position your account will get adjusted on daily basis as per the closing price of Nifty derivative contract. For Example - If you buy one lot of Nifty at 4950 and Nifty closes at 4500 then Rs 50 as profit (total profit will become 50 qty x Rs 50 = Rs 2500) will get credited in your account. On the other hand if Nifty went down Rs 50 then Rs 2500 will be debited from your account. If you do not have balance in your trading account then very next day your position will be squared off by your broker. Some brokers provides some extra days to transfer money in your trading account.
6. If you buy and sell on a same day then the profit and loss will be adjusted in your trading account accordingly.
7. Trader has to square off the positions before or on expiry. If you does not square off then the contract expires on the expiry date and the money gets adjusted in your account.
8. You can buy and sell Nifty derivative contract in your trading account/terminal. Separate account is not required.

Advantages of trading in Nifty

•  Trader get margin to trade on Nifty.
•  Small traders can even buy Mini lot of Nifty contract which consist of 20 quantities of  Nifty. To buy one lot of Nifty mini lot, you need approximately Rs 13,000.
• You can do day trading (Intraday trading) as well as carry forward (hold your nifty positions) till the expiry period of your contract (minimum one month expiry and maximum three month expiry)
• You can trade both sides of the Nifty means if you feel market is going up then you can buy Nifty contract and if you feel market is going to fall then you can short sell Nifty and later buy it to cover up your positions.
• Very Low brokerage rates. Low brokerage rates increases your profit percentage. We are offering 0.03% for buying and 0.03% for selling.
• High liquidity - Very high volumes are traded in Nifty future contract which will make the trader to square off at any time and at any price.

Risk Involved in Nifty trading

Trading in Nifty future is a risky, heavy loss can occur. Basically trading involves big risk either you trade in Nifty future or in any other future contract or in stocks. Trading requires lot of experience and market knowledge. Investing and trading are two different factors in share market. Investing is not as risky as trading.

Buy Mahindra & Mahindra

Buy Mahindra & Mahindra Ltd CMP: Rs. 665 Target Price: Rs. 775

Mahindra & Mahindra Ltd is the flagship company of the Mahindra Group, present in diverse business areas. It is the leader in UVs (56%) and tractors (41%), and is growing significantly in financial services, tourism, infrastructure development, trade and logistics through its various subsidiaries and associate company. Besides thriving in UV and tractor businesses, the company has a sizeable market share in the LCV market (~30%), three wheelers (7%) and two wheelers (~5%). To venture into the MHCV space, M&M would be launching trucks ranging between 16MT and 49MT, in collaboration with Navistar International USA Inc.

Mahindra & Mahindra dominates the domestic tractors market, commanding 41% market share. Three key structural factors—higher farm product prices, firmer labour wages (notably NREGA), and greater commercial usage of tractors—have significantly increased rural incomes and brought smaller farmers (owning <4 hectares of land) into the "tractor purchasing" ambit. These factors are likely to drive long-term tractor demand, which Mahindra & Mahindra (M&M) is well-positioned to capitalize on.

Sensex at 18K

Indian equity continued their upside for the second consecutive day - the Nifty was inching up towards the 5400 level at 10:43 hours as global markets were on uptrend on stablility in Egypt after President Muhammad Hosni Sayyid Mubarak resigned on Friday. He handed over control of the country to the military after headed country for 30-years as a president.

About 10 shares gained as compared to one share declined on NSE Nifty 50. Financial, metal, capital goods, auto and power companies' shares were leading the markets higher. However, heavyweight Reliance Industries on sellers' radar today with nearly one percent fall as there were reports that the company may have to pay fine for insider trading.

Rakesh Arora of Macquarie Capital Securities is bullish on Indian markets. He said that the Sensex is likely to touch 22,000 by the year-end.

Arora explained that there is a renewed interest as the Indian growth story looks largely unparallel in the world. “Talking to the investors, it does appear that they are looking for buy ideas. I would say that we had a short and sharp correction and maybe the investors will come back at these levels, he added.

The 30-share BSE Sensex was trading at 18,001, up 282 points and the 50-share NSE Nifty surged 88 points to 5,397. The broader indices were outperforming the benchmarks - the BSE Midcap and Smallcap indices rallied 2.5-3%.

You Should Know Before The Opening Bell

In the US markets, stocks ended mixed with the Dow ending its winning streak, closing fractionally lower after rising for eight straight sessions as hopes for a possible resolution to the political unrest in Egypt lifted equities off their intraday lows. For the most part, risk-sensitive asset markets held up.

In economic data

10 things you should know before the opening bell

* New claims for jobless benefits fell to their lowest level in 2.5 years down 36,000 to settle  at a seasonally adjusted 383,000.
* Wholesale inventories climbed 1% to their highest level in almost two years while sales rose much less than expected.
* Business inventories rose to USD 430.5 billion, the highest since January 2009.
* Foreclosures continued their upward climb in January surging 12%.
* The US treasury monthly budget report showed a January deficit of USD 49.8 billion versus $80.0 billion last month.

And in the day's economic data to watch out for:

* The US international trade gap in January is expected to rise to USD 40.5 b from USD 38.3
* The University of Michigan’s consumer sentiment index is expected to rise to 75.0 versus 74.2

European shares fell on Thursday, hit by some disppointing results from index heavyweights like Credit Suisse and by renewed sovereign debt concerns after Portugal's government bond spreads widened.

The US dollar fell to a 3-day low against the euro on Wednesday, after a strong treasury debt sale accelerated bearish sentiment in the wake of comments by Federal Reserve chairman Ben Bernanke that its bond buying program would continue.

Oil rose after Egyptian president Mubarak defied calls for his resignation, agreeing only to delegate some authority to his deputy, prompting concern supplies may be disrupted amid further unrest.

Gold fell to USD 1,363 an ounce as the precious metal remained under pressure from the firmer dollar and sharper risk appetite.

And back home, markets closed the session lower for the third consecutive day amid an extremely choppy trade yesterday led by banking and telecom heavyweights. The Nifty touched the 5200-mark during the day for the first time in eight months to end at 5,226 after trading in a tight range of 5210-5250 all day.

An important cue for the markets today will be the IIP data—CNBC-TV18 poll throws up a weak 1.69% versus the 2.7% in November and hugely down from the double digit growth until October.

The Cairn India top management in an analyst call last evening made it very clear that its board is not in a position to accept any of the pre-conditions laid down by the oil ministry for approving the deal with Vedanta.

Even Vedanta had earlier communicated to the oil ministry that it could not accept these pre-conditions as it would be against the interests of Cairn India shareholders, especially minority shareholders. Cairn India’s top boss Rahul Dhir in this concall clarified that though the company has nothing in writing from the government on these conditions. The board cannot concede to ONGC's claim that royalty at the Barmer oil fields is cost recoverable.

The follow on offer for SAIL, which was scheduled for February has now been pushed to March. CNBC-TV18 learns that this delay could be due to some issue with the bankers.

Private Banks, ADAG, Auto up

The Nifty was trading in a tight range around 5250 level at 14:24 hours, though it trimmed some losses and recovered more than 70 points from day's low of 5,197, led by private banks, Anil Dhirubhai Ambani Group, auto, power and select healthcare companies' shares. Short covering could be the reason behind this recovery as traders might have felt that the markets were oversold.

However, the consistent selling in heavyweights like Reliance Industries, SBI, BHEL, Bharti Airtel, Infosys, TCS, HDFC, Wipro and HUL was putting pressure - down 2-3%. Metal companies' shares too were down barring SAIL with 6% gain.

We cannot ignore that a visitation of 4,900 levels looks very likely, says Rajesh Jain, independent market strategist. He said, however, "I hold the view that this is a good time to pick up that initial 20% of the stocks of your portfolio and perhaps, continue to accumulate them."

The 30-share BSE Sensex was trading at 17,500, down 92 points and the 50-share NSE Nifty fell just 12 points to 5,241. The broader indices too were showing recovery - the BSE Midcap Index was down just 0.3% and Smallcap down 1%.

ICICI Bank and Axis Bank from financial space gained 1-1.5%; IDFC rallied 3% and HDFC Bank was up 0.4%. DLF from realty space bounced back with 2% gain.

ADAG stocks like Reliance Communications, Reliance Power and Reliance Capital were up 1-3%. Reliance Infrastructure was the biggest gainer with 10% rise as the company will consider share buyback on February 14.

Tata Motors from auto pack gained more than 2% followed by Maruti, Hero Honda, Bajaj Auto and M&M with 0.5-1.3% rise. Heavyweights L&T and ITC rallied 1-2%.

New listing - Omkar Special was trading at Rs 56.60, down 42.24% as compared to issue price of Rs 98 a share.

Infrastructure was the most beaten down sector since Tuesday, which showed bounced back today. Lanco Infratech surged 22% and GMR Infra gained 12%.

Global stocks, dollar fall

Global stocks slipped and the dollar fell on Wednesday as investors worried about the run-up in equity markets this year and US Federal Reserve Chairman Ben Bernanke said US unemployment remained too high.

US crude prices retreated as official data showed increases in U.S. oil inventories, while prices for Brent crude in London topped $100 a barrel, supported by unrest in Egypt.

US government debt prices rose as bargain hunters emerged as anxiety over the U.S. central bank's inflation-fighting pace pushed benchmark yields to nine-and-a-half month highs.

Bernanke told the a US House panel that a 9% unemployment rate was too high and the rate of inflation too low for the Fed to budge from its super-loose policy stand, while acknowledging recent economic improvement.

The euro broke above a key USD 1.3700 level versus the dollar on Bernanke's testimony before the US House of Representatives Budget Committee that largely echoed a speech he delivered last week.

Wall Street edged lower as investors booked profits after stocks hit new two-and-a-half-year highs Tuesday, but strong earnings made it likely the market would continue an upward trend.

Global stocks, as measured by MSCI's all-country world index are up more than 4% so far this year and the S&P 500, a US benchmark, has gained more than 5% since the beginning of 2011.

"The primary trend (in the market) is that we are moving up on solid earnings, and a little bit of profit-taking on a small volume only means new bids are coming up," said Joseph Greco, managing director at Meridian Equity Partners in New York.

Shares of Dow components Coca Cola Co and Walt Disney Co jumped after both reported strong results, helping the index outperform the broad market.

The Dow Jones industrial average was down 21.42 points, or 0.18 percent, at 12,211.73. The Standard & Poor's 500 Index dipped 6.88 points, or 0.52%, at 1,317.69. The Nasdaq Composite Index fell 11.03 points, or 0.39%, at 2,786.02.

European shares were off, further retreating from 29-month highs hit earlier this week, weighed down by mining shares on concerns over demand after top consumer China raised interest rates to fight inflation.

"Our view is that gently, not aggressively, we are not mega bearish, take money off the table. We are looking to buy the market at a lower level," said Philip Lawlor, investment strategist at Smith & Williamson in London.

A rush of deals by stock exchange operators had little impact on the big indexes.

Germany's Deutsche Boerse is in advanced talks to buy NYSE Euronext, while the London Stock Exchange agreed to buy Canadian stock market operato.

The dollar was down against a basket of major currencies, with the US Dollar Index off 0.38% at 77.701.

Against the Japanese yen, the dollar was up 0.21% at 82.49.

US Treasury debt prices were higher. The benchmark 10-year note was up 6/32 in price to yield 3.71%.

Bund futures settled at 122.33, down 49 ticks on the day to briefly touch their lowest since mid-April.

US light sweet crude oil fell 24 cents to USD 86.70 a barrel. But North Sea Brent for March delivery climbed above USD 100 a barred, up 90 cents at USD 100.82.

The US Energy Information Administration said domestic crude stocks rose 1.9 million barrels in the week to Feb. 4, a smaller increase than the forecast of a 2.4-million-barrel build.

Nifty Above 5300

Equity showed smart recovery from day's low and turned extremely volatile in trade at 10:20 hours. The Nifty bounced back above the 5300 level, which means traders were providing buying support at the same level. They felt that it could be oversold at this level as it has been falling since previous week.

Haresh Shivdasani, managing director and head of equities at HSBC said the key concern for investors right now is near-term headwinds like inflation and interest rates. “We are perhaps somewhere in mid-cycle and typically these are times of caution,” he informed. He said the mood right now is cautiously optimistic.

Foreign institutional investors were net sellers of Rs 726 crore in equities yesterday, as per provisional data. They were net sellers of Rs 6,300 crore in January 2010. Shivdasani said, first half of 2011 will not be easy for inflows. “We will see flows returning in second half of 2011,” he stated.

Oil & gas, private financial, auto, healthcare and infrastucture companies' shares were supporting the markets for recovery. However, selling continued in BHEL, SBI, ITC, DLF, Hindalco, Sterlite, ACC, Wipro, Reliance Communications, Tata Power and Hero Honda, which were limiting the gains.

The 30-share BSE Sensex gained 62 points at 17,838 and the 50-share NSE Nifty rose 20 points to 5,332 on the back of short covering.

Four shares declined as against one share advanced on National Stock Exchange. The broader indices slipped 1-1.5%.

Heavyweight Reliance Industries and ONGC gained 1.7% each. India's second largest lender ICICI Bank jumped 2% and Kotak Mahindra Bank rallied 4%.

M&M shot up 3% ahead of numbers today. L&T, HDFC, HUL and HDFC Bank were up 0.5-1%.

In midcap space, S Kumars Nationwide, Shriram City, UCO Bank, Dish TV India and IRB Infra gained 2-4% while Prakash Industries tanked 20%. Jai Corp, Man Infra, Jyothy Labs and Allcargo Global fell 7-8%.

In smallcap space, Surana Inds, Symphony, Everonn Education, Kirloskar Inds and Zenith Infotech rallied 4-9% whereas MIC Electronics, Allied Digital, INOX Leisure, C & C Construction and Piramal Life lost 7-13%.