The Hindu Business Line : <I>No triggers for India Inc </I>

If the global jitters rattled the market as it opened for trading on Wednesday, a lukewarm Budget delivered the knockout punch. The market, which had melted by over 600 points since the start of the month, plunged by another 540 points during the day's trading.

With a mostly agrarian tilt and infrastructure thrown in largely for relief, the Budget has failed to pack any significant policy measures for the corporate sector. While stock market participants were spared an increase in the Securities Transaction Tax, an additional one-per cent cess is poised to trim the disposable surplus for investors. Corporates, already grappling with higher input costs, the increase in the Dividend Distribution Tax, removal of the tax-free status for the software sector and additional impost on cement manufacturers have left them sulking.

Corporate India has been sandwiched between a drop in peak import tariffs and stable or higher excise duties. While the peak rate of import tariffs have been reduced from 12.5 per cent to 10 per cent, the Budget fineprint reveals a drop to 7.5 per cent across various chemical and petrochemical products (such as polyethylene, polypropylene and polystyrene). The drop in import tariffs on petrochemicals could affect players such as Reliance Industries, IPCL, Chemplast, DCW and GAIL, but end-users in the FMCG segment such as Hindustan Lever, Godrej Consumer and Colgate-Palmolive may benefit from lower packaging costs and get relief from input cost pressures. ITC, the diversified FMCG major, has managed to escape lightly with a possible reprieve from VAT and a modest impost on cigarettes.

Infrastructure concerns remain

The recurring theme of infrastructure too has not played out fully to expectations. The increased outlay for irrigation is likely to help players such as IVRCL and Nagarjuna Construction. Infrastructure status granted to gas pipelines would benefit GAIL, Reliance and Gujarat Gas. However, the power equipment players will be disappointed as the direct tax benefits available to power generation and distribution companies has not been extended to them.

The poster boy of Indian services revolution-software services has lost its favoured tax-free status. The Budget impost of a minimum alternate tax of 11.3 per cent is likely to affect select mid-cap companies.

Sectors such as automobiles, banking, logistics and metals had hardly anything to take home from the Budget. The only solace to the auto sector could come in the form of the continuation of weighted deduction of R&D expenditure for the next five years and the reduction in the CST by one percentage point.

The Budget, however, offered a ray of hope for such sectors as textiles, oil, pharma and tourism. The extension of concessions under the Technology Upgradation Fund for textile manufacturers by another five years in the Eleventh Plan will benefit players such as Gokaldas Exports and Mahavir Spinning.

The reduction in the duties on petrol and diesel by 2 percentage points is likely to lighten the under-recoveries and offer some relief to the oil refining and marketing companies such as IOC, HPCL and BPCL.