Expectations for Budget 2012

[Sumpoorna]

The problems in India now are largely homegrown with greater perceived political inertia and lower flexibility in using fiscal and monetary policies to counter the economic moderation. It is hoped that the Budget for would look to correct these anomalies and send the right signals. Considering the weak macro trends, the investors are looking up to the government to relay its commitment to revive growth outlook with budgetary measures and using the fiscal policy as a tool for sustainable growth and development keeping in mind economic reforms. In India the climate seems to have turned positive and positive triggers for the markets such as the pace of decrease of interest rates, policy initiatives, pending legislations, and foreign capital inflows, seem more likely now than they appeared in the latter part of 2011. However, global factors such as breaking-up of the Euro might bring about a slump in the financial markets across the globe and a flight to safety might leave emerging markets like India in the doll drums. We expect 2012 to mark a year wherein fundamentals relentlessly march forward despite heightened global risks. 2011 was a year full of events and the memories of these events have already begun to fade away. The stock markets should be able to reach its all-time highs sooner than it would have appeared less than a few months back. Sumpoorna believes that the growth rate for FY 2012 should be around 7 percent; while the growth rate for  FY 2013 should be in excess of 7.5 percent in the wake of easing inflationary pressure and reduced borrowing costs. Further, we expect the medium term growth rate of the economy to be in the region of 7.5 percent to 8 percent. Further, we believe that the Union Budget would lay emphasis on the Infrastructure, Agriculture, and the Education Sectors keeping in mind the medium term growth objectives of the economy. Below are some of the key highlights of FY 2012, with projections made by Sumpoorna: % of GDP FY '09 FY '10 FY '11 E FY '12 P Rs.'000 crore Total Exp. Subsidies Interest Fis. Def. Central Fiscal Deficit 6.0% 6.5% 4.8% 5.8% FY '12 Budget 1,257.7 143.6 268.0 412.8 State Fiscal Deficit 2.4% 3.3% 2.6% 2.6% FY '12 (Projected) 1,330.8 191.1 269.6 549.7 Cumulative 8.4% 9.8% 7.4% 8.4% Gap (Proj – Budget) 73.1 47.5 1.6 136.9 Note: Exhibit 1 does not include Off- budget expenditure items. Source: Budget documents and Sumpoorna Research  The Union Budget to be presented on March 16, 2012 is likely to have an impact on various sectors. In the table below we assess the likely impact of the budget on various industries & sectors:   Industry Impact Companies to watch out for Airport Infrastructure & Aviation Positive Spice Jet and GMR Agriculture Positive Jain Irrigation Auto Components and tyres Positive Bharat Gears, UCAL, Rane Group, and Apollo Tyres Automobiles  Negative Maruti Suzuki, Tata Motors, and M&M Banking & Finance Positive SBI, ICICI Bank, Axis Bank, IDFC, HDFC, and Reliance Capital Cement Positive ACC, Ambuja Cements, and Shree Cement Chemicals Neutral BASF India Ltd Education Positive Everonn Education Ltd and Educomp Solutions Ltd. Fertilizers Marginally Positive Coromandel International, GSFC, GNFC, and Chambal FMCG Positive HUL, ITC, Dabur, and Godrej Consumer Hotels / Travel and tourism Neutral Thomas Cook, Indian Hotels and EIH Housing & Real estate Positive HDFC, LIC Housing, DLF, and IndiaBulls Realty Infrastructure Positive L&T, BHEL, Patel Engg., GMR and Punj Lloyd Information Technology Neutral NIIT Tech, Nucleus Software, Rolta, Infosys, Wipro, and TCS Logistics Neutral Gati Media and Entertainment Neutral Dish TV and TV Today Metal & Mining Marginally Negative Sterlite, NMDC, MOIL, Hindalco, Sesa Goa, and Vedanta Oil and Gas Neutral Reliance, Cairn, ONGC, and Videcon Paper Neutral AP Paper, BILT, JK Paper, and Orient Paper Mills Pharmaceuticals & Healthcare Neutral Dr. Reddy's Lab, Lupin Ltd, and Ranbaxy Laboratories Power Positive TATA Power, Jindal Steel and Power, and Adani Power Port Infrastructure Marginally Positive Great Eastern Shipping, SCI, and L&T Retail Marginally Positive Future Group, Gitanjali Group Roads and Highways/Construction Positive IRB Infra, GVK Power, GMR, and L&T Steel Neutral JSPL Textiles Positive Alok industries, Vardhman,and RSWM Telecom Neutral Bharti Airtel, Reliance Communications, and Idea Cellular Tractors Positive Mahindra & Mahindra, HMT, and Escorts   To download the full report, please click here or visit our website (www.sumpoornaonline.com).