Union Budget 2015-16 Decoded in 16 Easy Steps

Below we have decoded the Union Budget 2015-16 which was presented by Finance Minister Arun Jaitley on 28 Feb 2015:

Macro Economy

• 2015-16 growth between 8-8.5%, double digit growth feasible
• Retail inflation close to 5% by March, room for monetary policy easing
• To achieve fiscal deficit of 3% of GDP by 2017-18
• Fiscal Deficit target 3.9% in 2015-16, 3.5% in 2016-17
• Revenue Deficit to be 2.8% in 2015-16
• Current Account Deficit for 2014-15 to be below 1.3% of GDP
• Sharp increase in outlays of roads and railways and introduction of a new fund called “National Investment and Infrastructure Fund (NIIF)”

Our View

Growth oriented with slightly aggressive fiscal deficit number which is needed for putting economy on growth path.

Buoyant Markets

• To lower Corporate Tax to 25% over next four years
• GAAR implementation deferred by 2 years to April 2017
• Tax free bonds for roads, railways, irrigation projects
• GST to be put in place by April 1, 2016

Our View

Long term positive for companies and equities with likelihood of attracting better FII flows due to clarity on policy front.

Personal Finance

• No change in personal Income Tax
• Health Insurance Premium deduction hiked from Rs 15,000  to Rs 25,000; for senior citizens to Rs 30,000
• Additional 2% surcharge on people earning over Rs 1 cr; to fetch Rs 9,000 cr; Wealth tax abolished
• Rs 50,000 deduction for contribution to New Pension Scheme
• Service Tax rate hiked to 14%, from 12.36%. You can see online service tax filing procedure here. So eating out is costly including all services being used by you like mobile, dish tv etc as service tax has increased.

Our View

Additional money in hands of people to channelize towards long term savings and investments.

Others

• To introduce comprehensive law to deal with black money
• Benami property transaction bill to tackle black money transaction in real estate soon
• 100% deduction for contribution to Swachh Bharat, Clean Ganga projects
• Internationally competitive direct tax regime to be put in place to incentivise saving
• Incentivise use of credit, debit cards; disincentivise cash transaction to curb black money

Our View

Bold move to get black money back on country’s balance sheet and incentivising cashless economy.

Overall View

We feel that this budget has vision & clarity targeted towards long term economic growth. Emphasis has been made on developing infrastructure, more investments coming in through foreign investors, tourism, etc. Growth in our economy, reduction in corporate taxes and investment flow from foreign investors would help the equity markets perform better in long run.

Though there are no changes in the Income tax slabs for individuals, the effort has been put to ensure more savings in the hands of the individuals through the tax benefits in New Pension Schemes, Health Insurance deductions under sec 80D, etc. Overall, we feel that the budget has right intent to put Indian economy on fast track growth and now needs flawless implementation to turn this into reality!

Your take-away

• Invest in equities and equity oriented mutual funds for long term wealth creation.
• Take benefits of additional deduction available for Health Insurance and New Pension Scheme.

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How to Identify Your Style of Trading?

It is very important that you learn your style of trading to make money in the market.

As per Wikipedia the Day trader refers to the hold time that a trader, trading in capacity of a speculator, buys and sells financial instruments (e.g. stocks, options, futures, derivatives, currencies) within the same trading day, such that all positions will usually be closed before the market close of the trading day.

This trading style is called day trading. Depending on one's trading strategy, it may range from several to hundreds of orders a day. Check out our day trading tips and make money like professionals.

As per Wikipedia the Swing trader or Swing trading is a speculative activity in financial markets where a tradable asset is held for between one to several days in an effort to profit from price changes or 'swings'.

A swing trading position is typically held longer than a day trading position, but shorter than buy and hold investment strategies that can be held for months or years. Profits can be sought by either buying an asset or short selling. Check our Swing trading tips and capture the breakout.

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Skipper - To Buy or Sell - A Technical Perspective

Analysis of the chart of Skipper from technical perspective shows that a "Symmetrical Continuation Triangle (Bullish)" chart pattern has been formed on Skipper Ltd (538562:BSE).

This bullish signal indicates that the stock price may rise from the close of 126 to the range of 132- 149 - 156-165 level.

The pattern formed over 30 days which is roughly the period of time in which the target price range may be achieved, according to standard principles of technical analysis.

So far so good; we have seen the chart technically and now would like to see the other aspects related to the company as enumerated below:

Firing on two cylinders: Skipper is in a unique position to exploit the growing opportunities in two lucrative segments: power (transmission tower manufacturing and EPC projects) and water (PVC pipes). It is a leading transmission tower manufacturer in India and ideally placed to gain from the huge investments proposed in the power T&D segment (estimated to grow to Rs3 trillion over the next five years). It has a comfortable order book of Rs2,200 crore in the transmission business and is expected to record a steady growth of 20% CAGR during FY2014-17 with a healthy margin, given its backward integration into manufacturing of steel products.

Manifold expansion in pipes; going national from regional: In PVC pipes, the company’s footprint is well established but limited to the east and certain parts of central India. However, it has chalked out an aggressive plan to raise its capacity by 4x to 40,000TPA by FY2016 to become a pan-India player. Simultaneously, it is beefing up the hiring process to enter new regions with experienced hands and is looking to widen its distribution channel across India.

Margin expansion led by operating leverage and restructuring exercise: It enjoys the benefits of operating leverage on the margin and has restructured its low-margin steel tube business by leasing the capacities to Tata Steel on a cost-plus basis. Consequently, the overall margin will improve from 11% in FY2014 to 14-15% in FY2015 and elevate its RoE from 12% in FY2014 to around 16% in FY2015 (after the release of the working capital deployed in the low-margin tube business).

Set for strong earnings growth and return ratios; Buy: Skipper is a play on two key growth areas, power T&D and PVC pipes. While traction in the T&D space and aggressive expansion in the PVC business would drive its growth, the restructuring of the tube business would help expand the margin and improve the return ratios. We expect an earnings growth of 60% CAGR and a substantial expansion in the RoE during FY2014-17. This could be a strong re-rating trigger as the stock’s current valuations are also quite comfortable at 14x and 10x FY2016E and FY2017E earnings. Thus, we rate the stock as a Buy with a price target of Rs165 (based on 15x FY2017E earnings).

Key concern: The T&D EPC business is usually working capital intensive, hence any abnormal scale-up in this space could expand the working capital cycle and decrease the profitability. The company is also exposed to forex fluctuation risk due to overseas orders.

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20 Stocks to Move up - Goods & Services Tax (GST) Bill Implications

We provide below the name of companies which are going to get benefitted with the passage of Goods & Services Tax (GST) Amendment Bill and majority of the stocks has already started moving in anticipation.  Union Cabinet has already cleared the Goods & Services Tax (GST) Amendment Bill and is likely to be tabled in Parliament on or before 23 Dec 14.

The list of companies which are going to be the beneficiary of Goods & Services Tax (GST) Amendment Bill passage are as shown in the below screenshot.

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5 Stocks to Get Benefit in Modi Govt

The Modi govt is going to give thrust to infrastructure development and this is going to get translated into infrastructure, oil & gas and banking sector uptake. We are really impressed with vision of Narendra Modi. We had earlier covered that how Adani group is going to get benefitted with Modi govt and since then Adani power, Adani enterprises and Adani Port have given a dream run.

Now, we provide 5 stock tips which can give good returns in Modi regime and these are listed below:

• ICICI Bank target 1700. We have covered ICICI bank Stock technical analysis here few months back.
• Lupin with a target of 1050 and we have covered Lupin stock tip here.
• Yes bank with target 650 and we have kept Yes bank in our top 10 stock picks here.
• Crompton Greaves tgt 200-220
• M&M tgt 1300 as auto industry is going to zoom courtesy economic growth.

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