Motilal Oswal - Union Budget 2007-08: highlights and sectoral impact

[Sunil]

The Union Budget 2007-08 was presented in the backdrop of an exceptional year of economic and corporate profit growth but short-term worries like rising inflation and interest rates driving the markets down by 8% in the preceding two weeks. Markets fell another 4% today, driven by a global sell off in equities coupled with several sectoral budget announcements impacting either earnings estimates in some cases or just sentiment in most other cases. At the end of it all, our Sensex EPS estimate for FY08 stands downgraded by 0.6% to Rs830 (from Rs835 earlier), still a YoY growth of 17.7%!  

 

Considering the limited impact on fundamentals and positive long-term outlook, we once again recommend taking advantage of the sharp correction to buy stocks. Our top bets are Bharti Airtel, Reliance Communication, Maruti Udyog, ICICI Bank, Punjab National Bank, Infosys Technologies, Dr Reddy?s, SAIL, and Grasim. We are also upgrading our ratings of HDFC Bank, Satyam Computers, HCL Technologies and Larsen & Toubro from Neutral to Buy after the recent correction.

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