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Monday, February 28, 2011

Silver Trend,Crude Oil Tren for tommorow | budget effect on MCX Bullion and Trading Tips

Silver Trend
Silver prices likely to face resistance at $32.5/troy ounce and $33.8/troy ounce level i.e. at Rs. 49,767/kg and Rs.50,313/kg level in MCX March contract. While on lower side prices can take support at $32.5/troy ounce and $31.6/troy ounce level i.e. at Rs.49,767/kg and Rs.49,433/kg.

Crude Oil Trend
Crude oil Apr futures on NYMEX rose by 0.62% to $97.88/barrel from $97.28/barrel amid unrest spreading to Oman, Lebanon and Saudi Arabia. Even though on Friday NYMEX boosted the margin requirement on oil futures for the first time since March 2009 as crude traded above $100 a barrel to $6,075 per contract from $5,063 failed to pressurize the crude oil prices. The latest change on ICE also showed a boost in the Brent margin to $5,200 from $4,850 per contract along with the news in the market that Saudi Arabia has boosted the oil supplies by 9 million barrels per day were kept aside. What weighed on the bearish news were the unrest which continued in Libya and Bahrain along with the unrest which started yesterday in Saudi Arabia, OPEC’s largest oil producer.

BUDGET HIGHLIGHTS | Budget Analysis | Budget Conclusion

- A big negative for garment manufacturers already battling a rise in cotton prices Automobile Sector
- No change in excise duty; status quo maintained at 10%
- Higher allocation under infrastructure schemes
- Critical parts/assemblies required to manufacture hybrid (green) vehicles granted exemption from basic custom duty of 10% and special CVD
Impact: Positive
- Any increase in excise duty would have directly impacted prices especially in the commercial vehicle segment, thereby resulting in lower demand. The sector is already battling rising raw material costs and any further pressure would have a direct impact on margins.
- Increased expenditure on infrastructure is expected to directly benefit the CV segment.
Real Estate
- Upped priority home loan limit to Rs 25 Lakh Vs Rs 20 Lakh
Impact: Positive
- Welcome policy push for the residential segment of the real estate sector, but the Rs 5 lakh increase is way below the Rs 20 lakh raise that ASSOCHAM has been asking for (at least in the metro cities)
- Good news for housing finance companies as this means access to cheaper funds
- 10% excise duty on branded garments
Impact: Negative
- Experts believe that companies will pass on the increased cost burden to the consumers
Banks – Public Sector
- Rs6000 cr to be provided in 2011-12 for maintaining minimum Tier I Capital to Risk Weighted Asset Ratio (CRAR) of 8% in public sector banks
Impact: Positive
- A big positive for PSU banks as this provides a guarantee for their capital base in FY12
Information Technology
- No extension of tax benefits under the Software Technology Parks of India
- Increase in MAT to 18.5%
Impact: Negative
- With STPI benefits expected to lapse in Mar 2011, this move is expected to hurt IT companies who will now have to pay higher taxes from FY12

Transport - Aviation
Service tax raised by Rs50 for domestic travel and Rs250 for international travel by economy class
Impact: Negative
- For a sector constantly battling high ATF prices, this news will not go down well with its customers.
In a nutshell:
Key sectors expected to benefit are: Banking & Financial Services (due to low borrowing programme), Real Estate (due to hike in interest subvention), Cigarettes (due to no increase in taxes) and Automobiles (no increase in Excise). Key losers are Technology (MAT applicable on SEZ), Ports (MAT applicable on SEZ), Iron Ore exporters (hikes in duties).

 Economy - Growth Prospects
 - Economy expected to grow at 9% in 2012, plus or minus 0.25%
 - Inflation seen at a lower level in the financial year 2011-12
 - Exports grown by 9.6%, imports by 17.6% in April-January 2010-11 over corresponding period last year
- In current year, overall economic growth is expected at 8.6%, agriculture growth at 5.4%, industrial growth at 8.1%, and services growth at 9.3%.
Taxes – Highlights

Income Tax
- Personal income tax exemption limit raised to Rs1.8 lakh from Rs1.6 lakh for individual tax payers
- For senior citizens, the qualifying age reduced to 60 years and exemption limit raised to Rs2.50 lakh.
- Citizens over 80 years to have exemption limit of Rs 5 lakh.

Direct Tax
- Standard rate of excise duty held at 10%; no change in CENVAT rates
- To reduce surcharge on domestic companies to 5% from 7.5%.
- Direct tax proposals to cause Rs115 bn in revenue loss
- Service tax rate kept at 10 percent%
- Customs and excise proposals to result in net revenue gain of Rs73 bn
- Service tax widened to cover hotel accommodation above Rs1000 per day, A/C restaurants serving liquor, some category of hospitals
- Service tax on air travel increased by Rs50 for domestic travel and Rs250 for international travel in economy class. On higher classes, it will be a flat 10%
- Base rate on excise duty raised to 5% from 4%
- Service-tax proposals are expected to result in a revenue gain of Rs4000 cr.
- Net revenue loss on account of direct taxes will be Rs11500 cr. Net revenue gain on account of indirect taxes will be Rs11300 cr.
- Branded apparel sector to pay mandatory excise duty of 10%

Fiscal Deficit - Projections
- Fiscal deficit seen at 5.1% of GDP in 2010-11
- Fiscal deficit seen at 4.6% of GDP in 2011-12
- Fiscal deficit seen at 3.5% of GDP in 2013-14
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