The Sensex and Nifty have made higher highs and higher lows for two days. But that says nothing for now
The market opened in the green this morning and was range-bound till the time finance minister Pranab Mukherjee began his Budget speech. Early announcements about a strong economy and growth of 9% next fiscal, with the focus on bringing down inflation, drove the indices higher. However, a smaller-than-expected hike in the income-tax exemption limit for individuals and nothing heard on the burning issue of crude prices pushed the indices back to the day's lows.
The market gained 550 points to the day's high and the Nifty was up 127 points as the FM concluded his speech. But the gains were short-lived, as profit-booking dragged the indices lower, and they closed around the opening levels.
The Sensex and Nifty closed in the positive today, but this hides the massive intraday volatility. The benchmarks opened with a positive gap at 17,811 and 5,330 respectively. During the budget speech, the Sensex fell to 17,750 while Nifty hit 5,312. After the budget speech was over, the indices climbed to their intra-day highs of 18,297 on the Sensex and 5,477 on the Nifty, and then collapsed again to their intra-day lows, though these were well above the Friday's lows. Finally, the Sensex ended 122 points up at 17,823 and the Nifty was up 30 points at 5,333. The advance-decline ratio on the National Stock Exchange was 934:795.
The market breadth on the key benchmarks was in favour of the gainers. The Sensex settled with 16 gainers and 14 losers, while the Nifty had 27 advancing stocks, 22 declining stocks and one stock remained unchanged. The broader markets also ended on a positive note, but lagged the Sensex. The BSE Mid-cap index gained 0.31% and the BSE Small-cap index rose 0.36%.
In the sectoral space, the BSE Fast Moving Consumer Goods index (up 4.47%) was the top gainer. This was followed by BSE PSU (up 2%) and BSE Realty (up 1.30%). The BSE Healthcare index (down 0.04%) was the lone loser, while the BSE IT ended flat.
The top gainers on the Sensex were ITC (up 8.23%), Mahindra & Mahindra (up 3.19%), Maruti Suzuki (up 3.07%), ONGC (up 2.93%) and Sterlite Industries (up 2.38%). The top losers were Reliance Infrastructure (down 4.46%), Jaiprakash Associates (down 2.88%), Hero Honda (down 2.36%), Tata Motors (down 2.11%) and Tata Power (down 1.79%).
Describing the budget as 'positive' and 'growth-oriented', the Indian industry welcomed the proposals announced by the finance minister. They said the measures to strengthen the farm sector and the move to reduce the fiscal deficit to 4.6% were steps in the right direction. The industry also hailed the move to make the foreign direct investment policy more 'user-friendly'.
Markets in Asia recovered from early losses to settle mostly higher, as the spike in oil prices boosted energy stocks. However, profit-booking kept a tab on the gains. A decline in the value of the yen pushed up Japanese stocks. The South Korean market suffered a deep cut, following threats by North Korea to attack South Korea and the US as the two allies planned joint military drills.
The Shanghai Composite gained 0.93%, the Hang Seng surged 1.42%, the Jakarta Composite rose 0.78%, the KLSE Composite added 0.13% and the Nikkei 225 advanced 0.92%. On the other hand, the Straits Times fell 0.48% and the Seoul Composite declined 1.23%.
Back home, outflows by foreign institutional investors (FIIs) on Friday were offset by domestic institutional investors (DIIs). While FIIs were net sellers of stocks worth Rs561.46 crore, DIIs were net buyers at Rs555.29 crore.
Coal India (up 12.42%) has decided to revise product prices with effect from 25 February 2011. The move would generate additional revenue of around Rs650 crore in 2010-11 and Rs6,200 crore in 2011-12, the company said.
Reliance Industries (RIL) (down 0.10%) is in talks with Japan's Orix Corporation to buy its 23.87% stake in Infrastructure Leasing & Finance Company (IL&FS), one of India's leading infrastructure developers and financiers, for around $1.2 billion. If the deal fructifies, it will make RIL the second largest investor in IL&FS after Life Insurance Corporation of India and will pave the way for its entry into the financial services business.
Sharon Bio-Medicine (up 5%) has signed a memorandum of understanding with Uzpharmsanoat, the state-joint stock concern of the Republic of Uzbekistan for setting up a pharmaceutical plant in Navoi Free Industrial Economic Zone in Uzbekistan. As per the agreement, Sharon Bio-Medicine will provide necessary technology to the new company and make investments along with the Uzbek government in the proposed company.
The finance minister has allocated Rs52,057 crore for education, an increase of 24% over the current year. Education experts have welcomed the increase. But CRY points out that while the increase is mostly from the education cess collected, the government’s own allocation has actually dropped to Rs7,096 crore from Rs7,769 crore
The education sector has received considerable attention in the Budget as finance minister Pranab Mukherjee increased allocation for education by 24% in the Budget.
Mr Mukherjee has allocated Rs52,057 crore for education, an increase of 24% over the current year. Education experts have welcomed the outlay for education.
“The education sector has got a good allocation with a rise of 24% to Rs 52,057 crore over the last year. This is a positive sign for the education sector. Even though the focus was mainly on agriculture and the infrastructure sectors, the education sector has got a fair share in the Union Budget,” said Prof KV Iyer, dean, United World School of Business, Hyderabad.
“Our ‘demographic dividend’ of a relatively younger population compared to developed countries is as much of an opportunity as it is a challenge. Over 70% of Indians will be of working age in 2025. In this context, universalising access to secondary education, increasing the percentage of our scholars in higher education and providing skill training is necessary,” the Finance Minister said.
He said the existing operational norms of the Sarva Shiksha Abhiyan have been revised to implement the right of children to free and compulsory education, which has come into force with effect from 1 April 2010. The finance minister has proposed to allocate Rs21,000 crore, which is 40% higher than last year allocation, for the Sarva Shiksha Abhiyan, for FY2011-12.
Child Rights and You (CRY), however, have expressed disappointment over the allocations for children in the Union Budget 2011-2012. “The allocations on elementary education have been increased to Rs29,129.55 crore, an increase of 16.21% over the last year. So, the Finance Minister’s claim of a 24% increase in allocations for education is not applicable for elementary education. As for the Sarva Shiksha Abhiyan, the allocation in 2011-12 is Rs20,999.78 crore, over last year’s revised estimate Rs8999.10 crore. Thus, it is an increase of only 10.53% as against Finance Minister’s claim of a 40% increase. Another thing to note in this increase is coming from the Prarambhik Shiksha Kosh (from the education cess) while the government’s own allocation for education has gone down from Rs7,769.10 crore (Revised Estimate 2010-11) to Rs7,096.15 crore (Budget Estimate 2011-12),” said CRY in a statement.
The government will also implement a revised Centrally sponsored scheme ‘Vocationalisation of Secondary Education’ from 2011-12 to enhance the employability of youth.
“The allocation for the Sarva Shiksha Abhiyan of Rs21,000 crore will give the much needed boost to the education sector,” P Kishore, managing director, Everonn Education, India’s second largest listed education company, told Moneylife.
“With the increase in the Sarva Shiksha Abhiyan budget of 40% to Rs 21,000 crore, we definitely see a much larger role for the private sector in K-12 and Teacher Training space built around the PPP (public-private-partnership) model,” Sanjeev Mansotra, chairman and MD, Core Projects & Technologies, told Moneylife.
The finance minister has also proposed to introduce a scholarship scheme for the Scheduled Castes and Scheduled Tribes studying in classes ninth and tenth in FY2011-12.
“Mr Mukherjee’s step to introduce a scholarship scheme is praiseworthy as it would benefit about 40 lakh students,” added Mr Kishore.
The proposed National Knowledge Network (NKN), which will link 1,500 institutes of higher learning and research in India, will connect 190 institutes by March this year, while the rest will be connected to the network by March 2012.
“The NKN initiative shows the government’s inclination to reach quality education to the students irrespective of their geographies,” said Mr Kishore.
For FY2011-12, the government has proposed to provide special grants to recognise excellence in universities and academic institutions.
He has proposed to allocate Rs50 crore each to the upcoming centres of the Aligarh Muslim University at Murshidabad in West Bengal and Malappuram in Kerala, Rs100 crore as a one-time grant to the Kerala Veterinary and Animal Sciences University at Pookode, Kerala; and Rs200 crore as a one-time grant to IIT, Kharagpur.
Mr Mukherjee has also proposed to allocate Rs20 crore for the Rajiv Gandhi National Institute of Youth Development, Sriperumbudur, Tamil Nadu, and Rs200 crore for the Maulana Azad Education Foundation.
“This is indeed a great encouragement for universities and institutes to continuously innovate or update their facilities,” said Mr Iyer.
Pranab Mukherjee blames supply chain problems for rising food inflation, but announces long-term initiatives that will not resolve the problem of the aam aadmi quickly enough
Finance minister Pranab Mukherjee has attributed galloping food prices to "shortcomings in distribution and marketing systems". Presenting the Union Budget in Parliament today, Mr Mukherjee also called on state governments to review the Agriculture Produce Marketing Act (APMC), which farmers say is responsible for lower prices for their produce.
The finance minister dwelt at length on the matter of inflation, however, some experts felt that the Union Budget was long on announcements, but fell short on tackling high food prices.
The finance minister said, "The recent episode of inflation in vegetables and fruits has exposed serious flaws in our supply chain. The government regulated mandis sometimes prevent retailers from integrating their enterprises with farmers. There is need for the state governments to review and enforce a reformed Agriculture Produce Marketing Act urgently."
The director of APMC Mumbai, Ashok Walunj, speaking to Moneylife said, "If he feels that there should be review, we are ready to accept whatever changes. They should have a discussion with us on the issue."
The finance minister said a decision has been taken to create 20 lakh metric tonnes of storage capacity under the Public Entrepreneurs Guarantee (PEG) Scheme through modern silos. Accordingly, 2.6 lakh tonnes of capacity will be added by March 2011, based on existing sanctions, and this will go up to 40 lakh tonnes by March 2012.
"There is a shortage of storage capacity of 32 million tonnes and even conservative estimates put the immediate investment requirement at Rs10,000 crore," said Sanjay Kaul, managing director and chief executive officer, National Collateral Management Service Limited. "The grant of infrastructure status to this sector will provide a major fillip for investment in this vital sector."
An official with an institute that tracks vegetable prices, said that "the proposal to increase storage capacity is a positive step, though the institutes-both government and private-should be more focused on their management strategies which are often faulty. For example they don't know how much would be procured and how much storage space will be needed for the produce. Hence the problems of shortage of supply and high prices."
The finance minister announced various initiatives to tackle rising food prices, topmost of them all was to boost agricultural productivity. Some of the measures are to invest in cold storage projects, build mega food parks, creating vegetable clusters, promoting higher production of cereals like bajra, jowar and ragi and upgrading the processing technology. About Rs3,000 crore is to be provided to NABARD, in phases, to strengthen cooperative societies. "This initiative would benefit 15,000 cooperative societies and about three lakh handloom weavers," the minister said.
But expert are critical that the Budget does too little to solve the issue of food prices. Shashi Panikar, professor of economics at Mumbai University says, "The finance minister has done too little for the common man who is facing the brunt of rising food prices. Even in taxation there is no major relief. All these announcements of cold storages, food parks, are very long term in nature. They are insufficient to combat the problem of food inflation."
On the APMC issue, Mr Panikar said, "Even about the APMC Act, the finance minister only said that state government should look into it, but he did not give any road map, which is what people were expecting."
The finance minister also announced the direct transfer of cash subsidy for kerosene and fertilisers, to people living below the poverty line in a phased manner, to ensure greater effectiveness and better delivery.
Mr Kaul, CEO of National Collateral Management Service, feels that this subsidy initiative should have been extended to food subsidy as well. "The announcement to pilot test cash transfers in place of grant of subsidies for kerosene and fertiliser is another excellent initiative, but it would have been even better had this initiative been extended to food subsidies as well which currently do not reach the intended beneficiaries."