The biggest boost to the stock market came from the budget relaxation to foreign fund flow into SEBI registered domestic mutual funds. The Sensex was up by over 131 points to close at 17,832 points. The stocks of Mahindra and Mahindra, Larsen & Toubro, Maruti and ITC (tobacco was spared) showed appreciation. The automobile tax rebounded as it was spared of any extra tax. The mood was generally buoyant. The investor sentiment was bullish, once again.

The budget laid emphasis on the manufacturing sector, the infrastructure sector, the financial sector as well as the consumer sector. The FMCG companies such as Procter & Gamble and Hindustan Unilever showed good gains in the early trading following the customs duty cut. There was no increase in excise rates, indicating a tax policy stability, while the government promised to introduce the delayed direct tax code in the next financial year.

Although the MAT has been raised marginally (0.5 per cent) to 18.5 per cent and development of new SEZs are brought under MAT, the budget brought cheers to especially high earning companies by reducing surcharge on corporate tax to five per cent. An infusion of over Rs. 20,000 crore of government money into PSU banks to ensure their healthy capital adequacy ratio along with the policy initiative to allow license to more new private sector banks were taken well by both the market and the banking sector.

FIIs’ participation in infrastructure bonds also went down well in the bonds market. The latter will get further support as the government-propped tax-free infrastructure bonds, admeasuring Rs.30,000 crore, enter the market for subscription, next year.

The doubling of the PSU disinvestment target to Rs. 40,000 crore was received with big cheers on the PSU counters both at the Bombay stock exchange and the national exchange.

Export duty on iron ore was overdue. However, the rate is unlikely to have any significant impact on the export volume of this vital raw material for making steel.

On the negative side, insurance companies may be hit by the new tax regime. The health insurance coverage cost is bound to go up. This will affect the common man, who has little faith in government hospitals and health centres. Corporates and individuals will have to pay more for air travel and hotel expenses.

Actually, a very low revenue gain from additional indirect taxes at Rs. 11,300 crore, accounting for a very insignificant portion of the Rs. 12.57 lakh crore budget, explains the finance minister’s main intention behind the budget provisions as to ensure a higher economic growth and a more cheerful stock market, next year. (IPA)