MFs welcome budget 2009-10

Mutual Funds have welcomed budget 2009-10 saying the proposals were on expected lines. No mutual fund is in any mood to realign investment strategy based on the budget. Not being perturbed by any negative market sentiment, fund houses feel that it is time to look at stocks through its fundamentals. Moreover, fund houses are mostly over-weight on infrastructure sector.
The FM has declared that India Infrastructure Finance Corporation is expected to finance Rs 1,00,000 crore infrastructure projects. Fund managers now feel vindicated in view of taking exposure in infrastructure stocks in their equity funds.
Going forward, AMCs to anticipate some policy announcements on disinvestment front, which they think, FM has made enough reference in his budget proposal.

Budget Reactions from fund houses:
"The budget is positive. The market has over-reacted to it. MF strategy does not change on one budget. Those announcements like disinvestments that market expected will come in due course of time. There is nothing to be disappointed," said Navneet Munot, CIO, SBI MF.
"The budget has kept the continuity of stimulus package through spending in sectors like infrastructure and agricultural sectors. Further, focus on delivery mechanism is also a welcome move. However, market reaction is a result of over expectation," said A Balasubramanian, CIO, Birla Sunlife Mutual Fund, who feels, budget is good from medium to long term perspective.
"If there is no policy announcement, there are enough references to policy count like on fiscal prudence or disinvestment. In the next few weeks or months we would witness some real policy announcements based on those references. Consequently, we will be tweaking our investment strategy," said Ved Prakash, Managing Director, TATA Asset Management, who feels, that market reacted emotionally to the budget out of over expectation and the budget truly reflects reality of current environment.
"The budget is very much on the lines of expectations. We are not realigning out investment strategy. The market disappointment basically come from the size of fiscal deficit that is now pegged at 6.8% for FY10 fiscal deficit of GDP as against the target of 5.5%," said Sanjay Sinha DBS Cholamandalam.
"No policy announcement coupled with the size of fiscal deficit has led to a correction in the market. We have already realigned our investment strategy before budget expecting the possible outcome which is very much on line with the budget," said Mohit Mirchandani, head-equity, Taurus Mutual Fund.

Source: http://economictimes.indiatimes.com/articleshow/4744568.cms

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What is a Stock

A share of stock represents a fractional ownership stake in a business corporation. Corporations issue stock in order to raise money for their business operations. Individuals and organizations that buy this stock become part owners of the business. The more stock one purchases the greater the fraction of the business one owns. With the purchase of stock an investor assumes the rights and responsibilities of a part owner in the business no matter how small his stake in the business. One of those rights is the right to elect the board of directors. The board of directors oversees the operations of the company. They are also responsible for selecting the Chief Executive Officer (CEO), who runs the day to day operations of the company and reports to the board. Investors also have a right to receive dividends if dividends are declared. The amount of dividends an investor receives is based on the amount of stock they own.
Companies declare dividends as a way of sharing profits, but they are not obligated to do so.

Why would one invest in the stock of a company
The primary reason that investors invest in stock is they hope to sell their stocks for a higher price than they bought it for. Hence the popular saying, buy low, sell high. Some investors also invest in stocks in order to earn a steady income from regular dividend payments.
Stocks can be classified according to certain investment characteristics that they posses.
Stocks of high quality corporations that maintain a leadership position in their industry are usually classified as BLUE CHIP stocks examples include Microsoft, IBM , Coca-Cola, Wal-Mart. These stocks are generally considered safe investments and are favored by cautious investors.
Stocks that pay a high portion of their profits as dividends to investors are termed INCOME stocks. They are sought out by investors who want to earn a steady income stream from their investments. Stocks of Public utilities are good examples of income stocks. Stocks that move as the economy moves are referred to as CYCLICAL stocks. When the economy experiences a downturn they do poorly and when the economy is booming they do great. Examples of such stocks are auto industry stocks, steel stocks and industrial chemical stocks. Stocks that are immune from the general economic condition are known as DEFENSIVE stocks. These stocks are not seriously influenced by what is going on in the general economy. Good examples of these are grocery, alcohol and utilities stock. The demand for their products and services remains constant in good or bad times. Stocks that are expected to report higher than average earnings and sales revenues and reinvest most of their profits are often classified as GROWTH stocks. Growth stocks are often highly sought after because their stock price tends to rise quickly. Growth stocks can be found in any sector, but they are usually found in the technology and
pharmaceutical sectors. Eventually, a growth stock will stop growing at an above average rate. Examples of past growth stocks include Microsoft, Cisco systems, Genentech, Starbucks and McDonalds. Investors looking to buy or sell stocks simply contact their broker, and then place an order for a specific amount of stock. The broker then states the bid price- the highest price buyers are willing to pay for a stock- and the ask price-the highest price sellers are willing
to sell a stock for. The investor then decides whether to place a market, stop or limit order. A market order instructs the broker to buy or sell at any available price and its executed immediately. A limit order, on the other hand, is an order to buy a stock at no more, or sell a stock at no less, than a specific price, within a specific time limit. A stop order much like a limit order, is only executed when a price is reached, the difference being that a stop order becomes a market order when that price is hit and the order is executed at whatever available price. So if an investor with a stock worth $90 places a stop order to sell at a price of $80, once the price of the stock drops to $80 ,the order becomes a market order and then the trade is executed at the
best available price. Once the trade is executed the broker then provides confirmation to the investor. Most trades are usually executed in less than a minute. Stocks continue to outperform all other forms of investment and will continue to remain an integral part of the U.S financial system.

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Indian Budget Highlights

Highlights

Taxes

· Surcharge of 10% on personal income tax removed

· No change in Corporate taxes

· Increase exemption on personal income tax by Rs 15,000 to Rs 2,40,000 for senior citizens

· Increase exemption on personal income tax by Rs 10,000 to Rs 1,90,000 for women

· Increase in exemption on personal income tax by Rs 10,000 to Rs 1,60,000 for all others

· Surcharge of 10% on personal income tax removed

· Propose to phase out surcharge on Direct Taxes

· To remove Fringe Benefit Tax

· To remove Fringe Benefit Tax

· States agree on basic structure of Goods and Services Tax

· To raise Minimum Alternate Tax(MAT) TO 15 % of book profit

· MAT hiked from 10% to 15%

· Commodity Transaction Tax scrapped

· Carry Forward Tax credit on MAT to 10 year

· To exempt Pension trust from Securities Transaction Tax

· To create Alternate Tax disputes resolution mechanism for foreign companies

· Software Technology Parks of India (STPI) extended by a year

· GST to be a dual regime with Central and state terms

· No Securities Transaction Tax (STT) on sale/purchase of shares by NPT

Reforms, Tax reforms

· To work on Saral 2 form to make income tax procedure simple

· Tax reform system to be completed in 4 years

· Balanced approach to financial de-regulation in justified

· Review and aims of the budget

· It a mandate we accept with humility and will do all we can for the welfare of the nation

· Strong mandate for growth

· Sensitive to the challenges of a young India

· The govt has to sustain a growth of 9% create 12 mn jobs per year

· Reduce poverty levels by half by 2014 infrastructure investment to more than 9% by 2014

· Focus to sustaining momentum in exports

· Strengthen primary healthcare delivery

· Plan to strengthen primary health care

· Broaden inclusive growth agenda

· Our target of agricultural growth at 4%

· Signs of revival of domestic industry

· Fiscal deficit has widened from 2.7 % to 6.2% of GDP

· Institutional reforms to bring the fiscal deficit under control

Challenges

· To get the GDP growth to 9% at the earliest

· To deepen the process of inclusive development

· To reenergise govt, govt must provide service with accountability

· Growth driver in the last 5 yrs has been private investment

· Structure of Indian economy has changes in last 10 yrs

· Now services constitutes more than 50% of GDP

· Increase investment in infrastructure to 9% by 2014

· To focus on infrastructure development

· Growth co-operative effort of Centre and States

· Job growth rate hit by dip in GDP

· Integration of Indian economy with the world has opened up new opportunities and new challenges

· Aim to return to FRBM target at the earliest

For revival

· Govt provided three stimulus package

· RBI took monetary measures to meet the needs of productive sector

· This led to fiscal deficit to rise to 6.2% in 08-09

· We achieved a growth of 6.7% of GDP last fiscal

· Signal of recovery visible in the last few months

· Uncertainty about revival of global economy remains

Infrastructure

· We had set up IFFCL to provide financial assistance to infra companies

· IIFCL will be given greater flexibility

· IIFCL will refinance 60% of bank loans in critical sectors

· IIFCL will evolve a take-out financing schemes for incremental funding in infra

· Fiscal stimulus at 3.5% of GDP helped economy revive

· Sensitive to the needs of young India

· Endeavour to make Budget participatory and ensure continuity

· Significant increase in capital inflows needs

· PPP to be encouraged especially in infrastructure

· Need to improve and strengthen regulatory framework

· To speed up Golden Quadrilateral Project

· Total investment of 100000 CFR in infrastructure

· Need to remove bottlenecks for speedy implementation of infra projects

· Highways allocated 23% more than 08-09

· Rs 15800cr for Railways

· JNURM allocation increased by 80% to Rs 12887 cr

· Basic amenities for urban poor to get more than 3000 cr to make country slum free in 5 yrs

· Provision for housing urban poor at Rs 3973 cr

· Allocation to NHAI increased to 23& Y-O-Y

· Fiscal deficit has widened to 6.7% of GDP

· Target agriculture credit inflows ay Rs 3.25 lakh cr

· · Focus of NCC, Gammon for highway development

· JNNURM to get more than Rs 12000 cr up 87%

· Basic amenities for urban poor to get more than 3000 cr to make country slum free in 5 yrs.

· Provision for housing urban poor at Rs 3973 cr

· Allocation to NHAI increased to 23& Y-O-Y

· Fiscal deficit has widened to 6.7% of GDP

· Target agri credit inflows ay Rs 3.25 lakh cr

· Focus of NCC, Gammon for highway development

· Rural electrification allocation up 27%

Agriculture

· Interest subvention scheme for agriculture loans to continue

· 60% population depended on agri

· Sustained increased in plan allocation

· Target credit flow Rs 325000 cr

· Loans upto 3 lakh at 7% per annum

· Those who pay their loans in time will get loans at 6%

· Task force set up to look into farmer suicides in Maharashtra

· Rajiv Gandhi Krishi Vikas Yojana allocation up by 30%

· Fertilizer subsidy to go to farmers directly

· To move towards Nutrient based subsidy regime

· Additional allocation of Rs 1,000 crore for accelerated irrigation project

· Central assistance for storm-water drainage project increased to Rs 500 crore from Rs 200 crore in the interim Budget

Exports

· Market development assistance schemes allocation up by 180% to 124 cr

· Interest subvention extended to march 2010 for employment extensive export sector

· Special fund for small industries development bank of Rs 400 cr

· Focus to sustain momentum in exports

· 2% Interest subvention for exporters

· Extension of interest subvention scheme extended upto March 2010 to cover sectors like handicrafts and handlooms

· Allocation for market development assistance scheme enhanced by 148 per cent

· To set up handloom mega clusters in Rajasthan, West Bengal and Tamil Nadu

· Export Credit Guarantee scheme extended till March 2010

Oil and gas

· Domestic oil prices should be in sync with global crude

· National gas grid to be set up

· Outlay for Assam Gas Project increased

· Effective interest rate is 8% for farmers with foreclosures

· Expert group to be set up petro product pricing

· Domestic oil prices should be in syncy with global crude

· To develop National Gas Grid

PSUs, banks and Insurance

· To hike promoter shareholding in PSUs

· Encourage people participation in disinvestment

· Banks and insurance will remain in public sector and will get all support

· Banking network to be expanded

· One banking centre in every block planned

· 160% hike in ADPRP

· Capital in fusion in PSU banks to keep them competitive

Inclusive development

· Creating entitlements backed by legal authority to provide basic facility to the aam aadmi

· NREGA gave employment to 4.4 cr household

· Reserve wage of RS 100 per day as an entitlement under NREGA

· Rs 39100 cr for 09-10 for NREGA an increase of 140%

· NREGA allocation increase at 144%

· New scheme PMAGY for integrated development of under developed villages

Pilot project this year

· Poverty eradication goal by 2014-15

· Interest subsidy to poor families for loans upto Rs 1 lakhs

Pension

· Substantially improve pension for armymen

· Pension benefit extended to war wounded being liberalised

· One Rank One Pension committee recommendations accepted

National Food Security

· BPL entitled by law for Rs 25 kg of rice/wheat at Rs 3 kilo

· Bharat Niraman allocation up 45%

· PM Gram Sadak Yojana allocation up to Rs 12000 cr

· Indira Gandhi Awas Yojana allocation up by 63%

Women and child development

· Focus on women self help groups

· 22 lakhs such groups of women active today, aim to link such self help groups to banks

· Corpus for such schemes to be raised to Rs 500 cr in this fiscal

· Aim to reduce female literacy by half in 3 years

· New scheme to give interest subsidy to poor students pursue any recognised course

Climate change

· Rs 562 cr for national river and lakes conservation

To build accountable institutions:

· RTI act an important step in ushering in accountability

· Unique ID project is major step in this regard: it also marks a beginning of the private involvement in projects of national importance

Police and security

· Rs 430 cr for police modernisation

· 1 lakh housing units for central paramilitary forces

· Borders: 2284 cr for strengthening of borders

Education

· Rs 50 crore for Chandigarh University

· Interest subsidy on loans for higher education

· Rs 2130 crore to set upto more IITs and IIMs

· Spending on higher education raised to Rs 2010 crore

Minorities

· Allocation hiked from Rs 1000 cr to 1700 cr in 09-10

· Scholarships for minorities

· AMU to get Rs 25 cr for each of its new campuses

· Rs 1740 crore outlay for minorities

Budget estimates

· Rs 1020838 cr total budget allocation for 09-10

· Out this more than Rs 6000 cr is planned expenditure while the rest is non-plan

· Increase in non-plan expenditure was due to pay commission and food subsidy

· Interest payment consists of 36% of non-plan expenditure

· Defence outlay up from Rs 105600 cr in 08-09 to 104703 cr in 09-10

· Total tax receipts expected at Rs 641079 cr

· Revenue deficit is estimated at 4.8% and 4.6 as per provisional account for 09-10

· Revenue deficit as percentage of GDP is pegged at 6.8%

· To spend Rs 10.20 lakh crore as total expenditure in 2009-10, crossing the Rs 10 lakh mark for the first time in history

· Increase in plan expenditure 34 %, non-plan at 37 %

· Revenue deficit projected at 4.8% in FY 10

· Fiscal deficit projected at 6.8 % in FY 10

Others

· DEPB scheme for print media extended

· Stimulus package for print media extended to Dec 31

· Hike in allocation for management of Mumbai Floods

· New project for modernisation of employment exchange

· A national web portal for the same

· New programme for rehabilitation of those effected by cylone Alia

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