The Hindu Business Line : Mixed trend

Recession fears after some weak US economic data and fresh worries over banks’ losses affected the sentiment for US stocks. The Standard & Poor’s 500 Index slipped 1.7 per cent to 1,330.63, the Dow Jones Industrial Average fell 0.9 per cent to 12,266 and the tech-focussed Nasdaq declined 1.4 per cent to 2,271.48.

Despite weak global trends, the Indian bourses finished the week in the positive zone, mainly on the expectation of positive Budget proposals. Despite a fall on Budget Day following populist measures such as waiver of Rs 60,000-crore worth bank loans to farmers and some negative measures for capital markets like raising short term capital gains tax, the BSE Sensex finished the week with a gain of 1.3 per cent; the NSE’s S&P CNX Nifty jumped 2.21 per cent.

It was a mixed show by the Indian counters at the US markets. ADRs such as Dr. Reddy’s Lab, MTNL, Sterlite Industries and Tata Communications closed the week positive. However, IT and banking counters were the major losers. The fall was sharp on Friday for these sectors following the Budget proposals.

There were expectations from the IT sector that the Budget might extend tax exemption, which ends by March 2009, for STP registration units. But the Union Budget was silent on that. Besides, it also raised the excise duty from 8 per cent to 12 per cent on packaged software.

Infosys fell 6.2 per cent to $38.92 ($41.5), Satyam Computer 3.3 per cent to $24.98 ($25.83), Wipro by 1.8 per cent to $11.54 ($11.75) and Patni Computers by 5.6 per cent to $12.11 ($12.83).

For the bank sector, the impact of loan waiver to farmers is still unclear in the absence of any budgetary allocation being made for the same. While the Finance Minister has indicated that liquidity would be provided over a period of time, it is still unclear whether the Government would be compensating banks for the write-off of loans or only support them by way of liquidity.

ICICI Bank fell by 3.7 per cent to $51.84 ($53.87) and HDFC Bank to $109.11 ($111.47), a drop of 2.1 per cent over the previous week close.

The Budget has proposed weighted deductions of 125 per cent on outsourced R&D expenditure to approved scientific research associations. Besides, excise duty has been cut to eight per cent from 16 per cent on all goods produced in the pharmaceutical sector. These are positives for the pharma sector. Dr. Reddy’s Lab closed 4.2 per cent higher at $14.31 ($13.73).

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