Union Budget 2017-18 - A New Normal
Nifty closes 155.10 points up at 8,716.40 Sensex closes 485.68 points up at 28,141.64 2
KEY STATS AT A GLANCE Total expenditure 21.47 Lakh Crore Agriculture credit target 10 Lakh Crore Transfers to States and UTs Lakh Crore Infrastructure spending Market borrowings Rural spending 3.96 Lakh Crore Lakh crore Lakh crore Women and Child welfare proposals SC/ST/Minorities development Long term irrigation fund Lakh Crore 0.88 Lakh Crore 0.40 Lakh Crore
Date of Budget: The advancement of budget date for completing expeditious parliamentary approval on time Merging Rail Budget with Union Budget: Breaking a tradition of 92 years Plan and Non-Plan Expenditure Distinction is Out of the-window: There will be no differentiation between plan and non-plan expenditure 4
Farmers Rural population Youth The poor and the underprivileged Infrastructure Financial sector Digital economy Public service Prudent fiscal management Tax Administration : Honoring the Honest 5
1. No change in corporate tax rate for medium and large corporates. However, corporate tax rate reduced to 25% for companies whose turnover is up to Rs.50 crore for FY 2015-16. 2. No change in Long Term Capital Gain or Short Term Capital Gain tax on capital markets transactions. 3. MAT credit can be carried forward for a period of 15 years against 10 years at present. 4. Holding period for Long Term Capital Gain on immovable property is reduced to 2 years from 3 years. The base year for Long Term Capital Gain indexation benefit is changed from 1-April-1981 to 1-April-2001. 5. No Long Term Capital Gain for land pooling government scheme transactions in Andhra Pradesh-Amaravati 6
6. Income tax rate reduced to 5% from 10% for taxable income slab between Rs. 2.5 Lakh to Rs. 5 Lakh. 7. A single one-page form for filing IT returns for taxable income up to Rs. 5 lakhs. 8. No scrutiny for Individual assesses whose total taxable income is not more than Rs. 5 Lakhs and for the first time filers. 9. Cash transaction is limited to Rs. 3 Lakhs. 10. Maximum cash donation to political parties is reduced to Rs. 2,000 from Rs. 20,000. 7
Budget is aimed at spending more on rural areas, infrastructure and poverty alleviation with fiscal prudence 8 One of the thrust areas of my tax proposals is to stimulate growth, give relief to the middle class, (promote) affordable housing, curb black money, bring transparency in political funding and simplify tax administration
1 No change in the Long Term Capital Gains for capital market transactions 2 The duration for Long Term Capital Gains for Land & Buildings reduced to 2 years from 3 years 5 4 3 MAT credit period increased from 10 years to 15 years Personal income tax rate reduced from 10% to 5% for income slab between Rs.2.5 5 lacs Fiscal Prudence has been maintained at 3.2% for FY18 and 3% for FY19E 9
6 Lot of emphasis on Rural, Poor and Underprivileged 7 Thrust on Digital economy, with cash transactions limited to Rs.3 lacs 10 9 8 Limit on political donations in cash reduced from Rs.20,000/- to Rs.2,000/- Infrastructure allocation at all-time high of Rs.3.96 lac crores Shifting focus from Plan and Non-plan expenditure to Revenue and Capital expenditure. 10
Corporate tax rate kept unchanged for companies with turnover above Rs. 50 crores for FY2015-16 1 No change in tax rate for slab above Rs. 5 lacs Additional surcharge of 10% for individual income between Rs.50 lacs to Rs.1 crore. For Rs.1 crore and above surcharge is unchanged at 15% 2 3 11
Infrastructure Power BFSI Tourism Telecom Automotive FMCG
Key Budget Proposals 14 Allocation for National Highway Authority of India (NHAI) stepped up to Rs. 64,000 Cr from Rs.57,676 Cr to boost road infrastructure; this is expected to increase demand for the overall automobile industry. The total allocation for transport sector including railways, road and shipping account to Rs. 2,41,387 Cr thus benefiting the auto ancillary industry. Proposal for multi modal transportation to improve logistics is expected to boost the commercial vehicle sector. The target for agricultural credit has been fixed at Rs. 10,00,000 Cr which is expected to improve demand for tractors and other farm equipment.
Key Budget Proposals Allocation for the Pradhan Mantri Gram Sadak Yojana for roads layout is Rs. 27,000 Cr, now being implemented at a pace of 133km per day. Further, 2,000 Km of roads for coastal connectivity have been identified for construction and development. This is expected to facilitate interconnectivity between small villages thus accelerating commercial as well as personal transportation. Proposed to carry forward the MAT for a period of 15 years instead of 10 years at present. 15
Impact Stocks Price as on Jan 31, 2017 Price as on Feb 1, 2017 Target Potential Upside (%) Eicher Motors Ltd 23028.45 24029.65 27762 16% Escorts 363.6 379.8 435 15% Force Motors Ltd 4141.85 4273.15 4637 9% T V S Motor Co. Ltd. 386.2 394.25 460 17% 16
Impact Stocks Price as on Jan 31, 2017 Price as on Feb 1, 2017 Target Potential Upside (%) Mahindra & Mahindra Ltd 1240.1 1302.4 1550 19% Maruti Suzuki India Ltd. 5894.25 6179.2 7100 15% Minda Corporation Ltd 89 90.2 115.67 28% SML Isuzu 1189 1208 1350 12% 17
Key Budget Proposals Affordable housing has been given 'Infrastructure' status. In line with the Indradhanush roadmap, Rs.10,000 crs have been reserved towards recapitalization of Banks in 2017-18. Listing and trading of Security Receipts issued by a securitization company or a reconstruction company under the SARFAESI Act will be permitted in SEBI registered stock exchanges. 19
Key Budget Proposals Promotion of a digital economy has a transformative impact in terms of formalization of cash in the economy. Use of ETF as a vehicle for further disinvestment of shares will be continued in future as well. Accordingly, a new ETF with diversified CPSE stocks and other Government holdings will be launched in 2017-18. 20
Impact Stocks Price as on Jan 31, 2017 Price as on Feb 1, 2017 Target Potential Upside (%) HDFC Bank 1286.65 1305.7 1471 13% Kotak Mahindra bank 774.15 777.05 911 17% State Bank Of India 260.35 270.7 296 9% 21
Impact Stocks Price as on Jan 31, 2017 Price as on Feb 1, 2017 Target Potential Upside (%) Canfin Homes Ltd Dewan Housing Finance Corporation 1860.3 1900.2 2250 18% 284.55 295.4 350 18% 22
Key Budget Proposals The target for agricultural credit in 2017-18 has been fixed at a record level of Rs. 10 lakh crores. Crop insurance cover for losses due to natural calamities under the Fasal Bima Yojna increased from 30% of cropped area to 40% in FY18 and 50% the year after. 24
Key Budget Proposals Allocation for Pradhan Mantri Fasal Bima Yojana has been increased to Rs 13,240 crore this fiscal from Rs 5,500 crore. The allocation for the next fiscal has been earmarked at Rs 9,000 crore. The sum insured under this Yojana has more than doubled from Rs. 69,000 crores in Kharif 2015 to Rs. 1,41,625 crores in Kharif 2016. Farmers will benefit from 60-day interest waiver announced by PM. 25
Key Budget Proposals Agriculture sector is expected to grow at 4.1% during the current fiscal on the back of a good monsoon. National agriculture markets to be expanded to 585 locations. A dedicated Micro Irrigation Fund will be set up in NABARD to achieve the goal, per drop more crop. The Fund will have an initial corpus of Rs 5,000 crores. 26
Key Budget Proposals A long term irrigation fund has already been set up in NABARD. Prime Minister has announced an addition of Rs 20,000 crores to its corpus. This will take the total corpus of this Fund to Rs 40,000 crores. Availability of milk processing facility and other infrastructure will benefit the farmers through value addition. A Dairy Processing and Infrastructure Development Fund would be set up under NABARD with a total corpus of Rs. 8,000 crores over 3 years. Initially, the Fund will start with a corpus of Rs. 2,000 crores. 27
Impact Stocks Price as on Jan 31, 2017 Price as on Feb 1, 2017 Target Potential Upside (%) Jain Irrigation Systems Ltd 94.4 95.9 110 15% Kaveri Seed Company Ltd 458.9 453.65 540 19% 28
Key Budget Proposals A merchant version of Aadhaar Enabled Payment System, will be launched which will be specifically beneficial for those who do not have debit cards, mobile wallets and mobile phones. A Mission will be set up with a target of 2,500 Cr digital transactions for 2017-18 through UPI, USSD, Aadhaar Pay, IMPS and debit cards. Banks have targeted to introduce additional 10 lakh new PoS terminals by March 2017. They will be encouraged to introduce 20 lakh Aadhaar based PoS by September 2017. 30
Key Budget Proposals 31 Government to launch two new schemes to promote the usage of Bharat Interface for Money (BHIM); a Referral Bonus Scheme for individuals and a Cashback Scheme for merchants. The government has allocated a massive Rs 10,000 crore towards the Bharat Net project for 2017-18. By the end of 2017-18, high speed broadband connectivity on optical fibre will be available in more than 1,50,000 gram panchayats, with Wi-Fi hot spots and access to digital services at low tariffs. A DigiGaon initiative will be launched to provide telemedicine, education and skills through digital technology.
Impact Stocks Price as on Jan 31, 2017 Price as on Feb 1, 2017 Target Potential Upside (%) H C L Technologies Ltd 811.15 813.95 937 15% Infosys Ltd 928.6 916.75 1159 26% Tata Consultancy Services Ltd 2229.8 2167.9 2719 25% Tata Elxsi Ltd 1423.35 1450.3 1780 23% SQS India BFSI 681.9 680 916 35% 32
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Key Budget Proposals Total Infrastructure spending pegged at Rs.3.96 Lakh Cr. Total allocation for Transportation sector pegged at Rs.2.41 Lakh Cr. Integrated approach for creation of infrastructure by drawing synergies between Railways, Roadways, Waterways and Aviation plans going forward. Allocation for Railways at Rs.1.31 Lakh Cr which includes Gross Budgetary Support at Rs.55,000 Cr. Allocation for Roadways at Rs.64,900 Cr with PMGSY allocation at Rs.28,000Cr. 34
Key Budget Proposals 35 Airport infrastructure, AAI act shall be amended for monetising of land parcels apart from PPP mode of development of airports in Tier 2 cities. Electronics Manufacturing to be incentivised through Modified Special Incentive Package Scheme (M-SIPS) and Electronics Development Fund (EDF) to the extent of Rs.745 Cr. An all time high allocation. Export infrastructure, to improve competitiveness a new and restructured scheme, Trade Infrastructure for Export Scheme (TIES) will be launched in 2017-18.
Impact Stocks Price as on Jan 31, 2017 Price as on Feb 1, 2017 Target Potential Upside (%) Larsen & Toubro Ltd 1446.25 1490.25 1727 16% N C C Ltd 83.05 84.55 97 15% Sadbhav Engineering Ltd 277.3 279.9 334 19% 36
Key Budget Proposals Import duty on LNG reduced from 5% to 2.5% To create integrated public sector oil major in line with international & domestic PSUs India to have two more strategic crude oil reserves taking India's crude oil storage facility to 15 MMT. The two new locations selected for reserves would be Bikaner & Odisha 38
Impact Stocks Price as on Jan 31, 2017 Price as on Feb 1, 2017 Target Upside(%) Gujarat State Petronet 152.25 155.65 175 12% Petronet LNG 373.95 386.75 432 12% Indraprastha Gas 939.5 958.4 1050 10% Oil and Natural Gas Corporation 202.55 200.2 230 15% 39
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Key Budget Proposals Action plan prepared to eradicate the following diseases : 1.Kala Azar by 2017, 2.Filariasis by 2017, 3.Leprosy by 2018, 4.Measles by 2020 and 5.Tuberculosis (TB) by 2025. Financial assistance in the form of direct transfer of Rs.6000 to bank accounts of pregnant women who undergo institutional delivery and vaccinate their new born. Two AIIMS (All India Institutes of Medical Sciences) hospitals to be setup in Jharkhand and Gujarat. 41
Key Budget Proposals New 5,000 postgraduate medical seats to be added by Government to increase number of specialty doctors, particularly, in rural areas. New rules to be formulated for regulating medical devices. These rules will be internationally harmonized to attract investments which will reduce the costs of medical devices. 42
Impact Stocks Price as on Jan 31, 2017 Price as on Feb 1, 2017 Target Potential Upside (%) Unichem Labs 270.45 269.9 324 20% Torrent Pharma 1299.95 1298.3 1525 17% Hester Bio 760.8 771 873 13% Natco Pharma Ltd. 690.9 671.55 841 25% 43
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Key Budget Proposals 45 Work will be initiated for 2,000 railway stations as a part of government s 1000MW solar mission. Under government s solar development park scheme, proposal to take up 20,000MW of additional capacity in second phase. No Basic customs duty on solar tampered glass which is used in manufacture of solar cells/ panels/modules. Countervailing duty on parts / raw materials used in manufacture of solar tempered glass for use in solar photovoltaic cells/ modules is reduced from 12.5% to 6%.
Impact Stocks Price as on Jan 31, 2017 Price as on Feb 1, 2017 Target Potential Upside (%) Power Grid 207.2 205.8 260 26% Tata Power 79.8 80.5 105 30% NTPC 172.35 170.9 220 29% Torrent Power Ltd 194.05 198.35 260 31% 46
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Key Budget Proposals Start ups which were given income tax exemption (with conditions) for carrying forward losses with continuous holding of 51% voting rights has been relaxed if the promoter holding continues. Profit linked deduction for three out of five years has been changed to three out of seven years. 48
Impact Stocks Price as on Jan 31, 2017 Price as on Feb 1, 2017 Target Potential Upside (%) Info Edge (India) Ltd. 824 833.5 1020 22% 49
Key Budget Proposals 51 A special scheme for creating employment in the textile sector has already been launched. In June 2016, the government approved Rs 6,000 crore special packages for the textiles sector to create one crore new jobs in 3 years, attracting investments of US$ 11 billion and generating USD 30 billion in exports. Basic customs duty on Nylon mono filament yarn for use in monofilament long line system for Tuna fishing, decreased from 7.5% to 5%.
Impact Stocks Price as on Price as on Target Potential Jan 31, 2017 Feb 1, 2017 Upside (%) Himatsingka Seide 335 343.6 380 11% Page Industries Ltd 14494.4 14361.55 17000 18% Raymond Ltd 494.95 496 600 21% 52
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Indian GDP growth is still at above 7% despite November s demonetisation. India remains among the fastest growing economies of the world. Agricultural sector is still the significant contributor to Indian economy. The image of the tree symbolises strength, stability and productivity. India is expected to regain its momentum with industrial growth sharply rising, which therefore acts as a strong base, and, is imperative for growth across sectors. The Make in India campaign has further supported our manufacturing sector. The cloud computing technology forms the trunk standing firm promising new beginnings. The leaves and the branches symbolise growth and harmony, and, is represented by the key sectors, i.e. Auto, Banking, FMCG, Infra, Power, IT, Real Estate and Pharma. Brought to you by