Budget Fails to Cheer Markets

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Indian equity markets were marked by spells of volatility today as various tax proposals made by Finance Minister Arun Jaitley in his Budget 2016-17 did not go down too well. Sentiments were hurt on the back of proposals for introducing dividend tax on those earning more than Rs 10 lakhs in dividends and for increasing securities transaction tax in some categories. At the closing bell, the BSE Sensex closed lower by 152 points, while NSE Nifty finished lower by 43 points. Midcaps and Small caps finished on a flat note. Sectoral indices finished mixed with Infra and IT stocks leading the losses.

Asian markets finished broadly lower today with shares in China leading the region. The Shanghai Composite is down 2.86%, while Hong Kong's Hang Seng is off 1.3% and Japan's Nikkei 225 is lower by 1%. European markets are trading lower today with shares in Germany leading the region. The DAX is down 1.75%, while France's CAC 40 is down 1.1% and London's FTSE 100 is down 1%. The rupee was trading at Rs 68.62 against the US$ at the time of writing.

Majority of the energy stocks traded with negative bias after Arun Jaitley said that petroleum subsidy has been reduced to Rs 269.47 billion for 2016-17 from estimated Rs 300 billion in the current fiscal. Of Rs 269.47 billion for next fiscal, Rs 198.02 billion has been earmarked for LPG subsidy and the rest is for kerosene. ONGC and Cairn India fared the worst with both the companies finishing below 5%.

In another development, GAIL and Indian Oil Corporation team is reportedly planning to visit Iran in March for the long-proposed US$4.5-million undersea gas pipeline between Iran and India. There are also plans to transport gas from Central Asian Republic of Turkmenistan to India through this pipeline.

PSU banks finished on a positive note after Arun Jaitley kept the amount of funds allocated for the recapitalization of public sector banks unchanged. The government will provide Rs 250 billion in the budget for fiscal 2017 for infusion into public sector banks. IDBI Bank and Central Bank were the leading gainers.

Shares of Jaiprakash Associates (JP Associates) surged more than 4% in today's trade after it was reported that UltraTech Cement is all set to acquire 18.40 million tonne per annum (mtpa) of cement capacity from Jaiprakash Associates for an enterprise value of Rs 165 billion. UltraTech will invest an additional Rs 4.7 billion to complete an ongoing project to set up 4 mtpa of grinding units. The deal will catapult UltraTech's capacity to 90.7 mtpa from the current 68.3 mtpa, making it one of the top cement producers in the world.

The company will acquire the cement plants with a total capacity of 22.4 mtpa in Madhya Pradesh, Uttar Pradesh, Himachal Pradesh, Uttarakhand, Andhra Pradesh and Karnataka.

Cement firms in South India are facing pressure on sales volumes due to weak demand. This announcement comes just two days after UltraTech called off a deal with Jaiprakash Associates to buy cement assets in Madhya Pradesh, citing regulatory issues. During the December quarter, UltraTech Cement's consolidated net sales and net profit increased by 4.7% YoY and 36.5% YoY respectively (Subscription Required).

Stocks of cement majors ACC and Ambuja Cements are hovering around their 52-week lows on account of the weakening trend in cement prices over the past six quarters. The decline has been sharp in the year till date, with prices falling by about 6%.

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