More gains in store for equities on market-friendly budget

The forthcoming week will largely be driven by post-budget reactions as analysts revise their estimates based on the announcements made in the budget. Market players largely welcomed the Union Budget 2010-11 which proposed market friendly measures including reduction in surcharge on corporate tax, lower fiscal deficit projection, roadmap for rollout of goods & service tax (GST) and direct tax code (DTC), among others. The stock market remains closed on Monday, 1 March 2010 on account of Holi.

A thrust on the infrastructure sector also augurs well from a long-term growth perspective. The Finance Minister has provided Rs 1.73 lakh crore for infrastructure development in 2010-2011, which accounts for over 46% of the total plan expenditure for the year.

Finance Minister, Pranab Mukherjee, has pegged the fiscal deficit for the year ended March 2011 (FY11) at 5.5% of the gross domestic product (GDP). This is lower than the fiscal deficit as percentage of GDP of 6.9% in the revised estimates for the current fiscal. The finance minister said the government also aims to reduce the deficit further to 4.8% of GDP in the year starting 1 April 2011, and to 4.1% in the year from 1 April 2012.

Progressing further with its disinvestment drive, the government has estimated to raise Rs 40000 crore from disinvestment in the year ended March 2011. It has also estimated Rs 35000 crore from sale of third generation telecom auctions.

The Finance Minister in his budget speech also unveiled a roadmap for implementation of goods and service tax (GST) and direct tax code (DTC). He said that the government is confident of rollout of GST and DTC by 1 April 2011. The deadline for the GST introduction was earlier pegged at 1 April 2010.

DTC will replace the Income Tax Act whereas the GST will replace most indirect taxes at central and states levels like service tax, excise duty, VAT, cesses, surcharges and local levies.

The Finance Minister also proposed a reduction in surcharge on corporate tax for domestic companies to 7.5% from the present 10%.

Foreign institutional investors (FII) inflow in February 2010 totaled Rs 1460.60 crore as of 24 February 2010. Their inflow in the calendar year 2010 totaled Rs 960.10 crore.

A lot will also depend on how the global markets pan out. US markets have turned volatile as sentiment took a hit from recent data showing a weaker-than-expected labor market. Meanwhile, global credit agencies have warned of further downgrades to Greece, which is struggling to tackle its debt crisis