Share mkt sheds 870 points on Budget day

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Share mkt sheds 870 points on Budget day

Overall the Union Budget appears a positive one, but it didn't offer much beyond small tax incentives, says IT industr

Pankaj Maru

Monday, July 06, 2009

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MUMBAI, INDIA: On the week's opening day, the Bombay Stock Exchange (BSE) index lost nearly 870 points, ending the day at 14043.40 points, a decline of 5.83 per cent, while the National Stock Exchange (NSE) also was down at 4165.70 points with a slump of 5.84 per cent on the budget day.

Both the IT stock indices behaved in similar fashion as BSE IT index was down by 2.74 per cent ending the day at 3236.33 points while CNX IT lost 114.75 points to close the day at 3430.55 points.

It appeared that the IT sector related announcements didn't receive much response and reflected in the downfall of the stock market today.

Speaking to CyberMedia News, Harit Shah, IT and telecom stock analyst at Angel Broking said, "It's by and large a positive budget particularly with tax exemption under STPI scheme, which was highly expected by the IT industry. IT stocks were down by 2-3 per cent is more of correction as the overall market was down by 7 per cent."

In terms of IT sector, Finance Minister Pranab Mukherjee stressed on inclusive growth driven by IT and made some announcements too.

However, the budget has evoked mixed reactions from the IT industry. MAIT, the apex body representing India's IT hardware, training and research and development services sectors, welcomed the budget for sustaining the national economic growth and making it inclusive.

"We welcome the government's decision to maintain the current excise and custom duty levels on IT products and components. The hardware industry supports long-term stability in policies and duty structures as frequent changes adversely impact the investment and business plans of the industry," said Vinnie Mehta, MAIT's executive director.

Gartner India's regional research director, vice president and distinguished analyst, Partha Iyengar called the budget overall disappointment in context to huge expectations from the Finance Minister.

"From an IT perspective, the two main areas of expectations related to an aggressive stance on education and infrastructure reform. While there were some steps on the infrastructure side, very little to no attention was made on the critical education front, specifically revamping of primary education," he said.

"Some allocation and 'tinkering' with the IITs is not what India needs now, but unfortunately that is all we have gotten in this budget," Iyengar added.

He said the one year extension of the tax holiday was a good move in that it provides some short-term relief.

"But it also clearly puts the writing on the wall that this is not a scheme that is going to be continued beyond this extension, thus allowing IT companies to plan accordingly for the medium to long term," commented Iyengar.

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