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Friday, Jul 09, 2004

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EQUITIES may be on weak terrain in the near-term as the turnover tax on stock market transactions could affect sentiment. It could have a bearing on trading levels in the cash and derivatives markets and may enhance impact cost. Over a period of time, investors and traders, alike, are likely to get used to the new system of taxation of securities and price in the benefits of the abolition of long-term capital gains tax and the reduction in short-term capital gains tax.

The capital gains proposals are value-enhancing for long-term investors as well as traders. Once the dust settles on the turnover tax, FIIs may also trade aggressively lured by the reduction in short-term capital gains tax.

Barring the effect of the turnover tax in the near term and the widely expected hike in interest rates, the Budget does not have any major negative that could affect equities. Fundamentals, oil prices, worries over the tepid progress of the monsoon and inflation appear to be more likely to drive prices as the budget hysteria is exhausted.

The absence of change to the interest rates offered by small saving schemes could ensure that these remain islands of prosperity and distort the interest rate curve across the economy.

The focus on agricultural and food processing is likely to benefit companies such as Punjab Tractors, Mahindra & Mahindra, Escorts, Alfa Laval, Praj Industries and Kirloskar Brothers.

The increase in the limit for FDI investment from 49 per cent to 74 per cent may provide a boost to Bharti Tele-Ventures and Tata-Teleservices. It would also enhance the attractiveness of the imminent IPO of Hutchison.

The introduction of tonnage tax is likely to deliver long-term benefit to companies such as Great Eastern Shipping, Essar Shipping and Shipping Corporation of India.

Stocks of companies in the textiles sector are likely to attract attention as policy initiatives have provided a big boost for the third year in a row. The ones to watch are Vardhaman Spinning, Alok Industries, Raymond and Arvind Mills.

Fiscal incentives for R&D may provide a thrust to Maruti, Bajaj Auto, TVS Motor and Tata Motors, to name a few. But gains may not be sharp.

Announcements favouring renovation and maintenance in the power distribution and transmission sector may be beneficial for Jyoti Structures and Kalpataru Power.

The bail-out package of Rs 580 crore for ITI may provide a prop.

The disinvestment through the offers for sale route may not provide a big upside for PSU stocks.

The imposition of service tax on companies engaged in producing content for television and radio may affect the profitability of companies such as Balaji Telefilms, NDTV, TV Today, Zee Telefilms, Cinevesta Communciation and Radaan Mediaworks.

S.Vaidya Nathan

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Stories in this Section
More bank finance for stock brokers

`Budget is not inflationary' — Transaction tax no impediment to stock market activities
Chidambaram plays the popular tune — Tax breaks for farm sector and lower middle class
Thumbs down by markets
Service tax on transport intermediaries hailed
Adopting the Keynesian route
FDI push on telecom
Shipping industry says `ahoy!'
Mutual funds — Odds stacked against debt funds
Tonnage tax at last for a smooth sailing
Focus on rural housing; tax rebates to stay
Banking on industrial growth
IIG to beef up infrastructure
ONGC, GAIL to carry the can
A rural slant
Power on `line
Govt to facilitate crop diversification
A bitter pill, says pharma sector
Chaos after the wait
At your service, tax!
A progressive budget
Striking a balance
Spurring investments
Continuance of economic reforms
Catch My Point!
Mixed response from India Inc
Move to drop Cenvat may pep up yarn market
'Market pessimism to end soon'
Steps initiated to integrate stock, commodity markets
FDI in aviation capped at 49% — Buying of aircraft to attract tax
Toyota to set up R&D centre in India
0.15 per cent tax to be levied on securities transactions
SPV for Sethusamudram canal project
Insurance FDI limit raised to 49 pc
IDBI gets Rs 9,000 cr to turn zero NPA
In coalition company
Captains of industry give Budget proposals a cautious welcome
Shifting gears
Turnover tax may spook capital gains
RBI sees no Budget trigger for change in rate, inflation outlook
Views from the bottom of a coffee cup
Customs duty cut on metals: Major price impact unlikely
Coop sugar sector needs tax holiday
Water bodies renovation innovative
Transaction tax a dampener: FISE
Modest hike in Central Plan outlays in real terms
Nothing much to glow about
Smooth ride for tractors
No excise duty on dairy machinery
The jam in the Budget
Disinvestment, reborn
Disappointing delivery
Little to build on
Right thrust on crop diversification
Oil and gas — Slickly left alone
3 key areas targeted for 24.6% revenue mop-up
Industry divided on price drop
A taxing scenario for media
Personal finance: Thrust to direct equity investing
A cess to educate
`Back-to-basics' theme
A `neutral-to-negative' exercise: MFs
A mixed bag
Little more buoyant now
Prices static? Not for long
FDI limit hike has insurers smiling — Service tax on risk premium for life cover is a dampener
`More clarity on turnover tax needed'
Sewing up the competition
A lot to cheer about
Turnover tax seen as a blip
Rural sops to get FMCGs going
May impact trading volume: market players
`VAT by 2005, a step in right direction'
Your dream car to become dearer
A limited first step
Consolidation vital
Slip into khadi and morph into a geek
Hindujas interested in desalination project proposal
Budget fails to impress CETMA
`Bold decisions taken on foreign investments'
No impact on gold market; platinum prices may fall
FIPB to fly with clipped wings
Cap for SSI loans raised to Rs 1 cr
A bitter-sweet pill for vegoil sector
Assurance to States on VAT compensation
Service tax hiked to 10 pc; list expanded
An effort to reflect mandate for change
New deal for farmers; more funds for States
Stress on moderation, stability in tax rates
Textiles woven in style
More services annexed at a higher rate
VAT full of promises
Watch out as the government shifts gears and piggybacks
No luck if you cross a `lakh'
Tax admin: Reforms kept in arrears
`No clear theme in the Budget' — Mr Yashwant Sinha, former Finance Minister

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