dr gs sood
Budget has come & gone
the Union Budget has become a non-event for some time now and those analysing and predicting what lies ahead for the market needs to do so in the broader policy framework that is being outlined in the months preceding the Budget. However, the Budget still retains its importance as the benchmark for future policy directions and as the guide to address issues like the current account and fiscal deficits and overall growth.
Since the stock market is a barometer of the economy, the immediate reaction of the market indicates that this year’s budget does not inspire any big positives. Given the Finance Minister’s mool mantra of higher growth leading to inclusive and sustainable development that seeks to limit the fiscal deficit to 5.3 per cent of the GDP for fiscal 2012-13 and to 4.8 per cent for Fiscal 2013-14, the issue on hand is how will the Government do this.
by Rakesh Bhardwaj
LIC Housing Finance
(CMP Rs 233)
A company with a network of more than 200 branches in semi-urban areas, LIC Housing Finance is not only one of the strongest contenders for a banking license but is also well-placed to exploit the sops offered in Budget 2013. The stock is available near its 52 week low with the CMP discounting the TTM EPS of around Rs 20 by a PE of mere 12 as against the industry average of more than 24. Its financials look attractive due to a very low default rate in the business the company is in, i.e., individual home loans. Its loan book grew by 24 per cent YoY with its individual loan portfolio growing at 27 per cent YoY. The asset quality is likely to remain healthy as it has shifted its focus to individual loans. The cut in the base rate in February will further reduce the cost of funds and boost margins. Overall growth in the housing finance industry, downward bias on interest rates, high return ratios and comfortable asset quality are the key value drivers for the stock.
One of the distinctive features of this year’s budget was the Finance Minister’s statement about foreign investment being imperative and his resolve to make things simpler for foreign investors, especially with regard to the procedures relating to registration and the KYC norms besides offering other sops. This probably reflects his confidence or rather over-confidence about attracting foreign investors. However, there are concerns as these flows are governed by fickle minds and are flirty in nature. I personally feel that the country needs to reduce its dependence on foreign flows, especially from FIIs, and instead concentrate on filling the investment gap by encouraging long-term savings and channelising these to financial assets. It is a surprise that in a country of more than 120 crore people with the highest rates of domestic saving, less than 2 per cent of household savings come into the capital market.
According to the Finance Minister, ‘doing business in India must be seen as easy…Read More