Indian stocks fall as budget disappoints

Indian stocks fell for a second successive day, led by oil stocks, after the government unveiled a budget for the next fiscal year that was seen as too modest for a corporate sector looking for more concessions. India's plans to target 5.7 trillion rupees ($114 billion) in borrowing in fiscal year 2012-13 was also higher than expected, while the fiscal deficit projection of 5.1 percent was also sharply higher from the government's announced target a year ago.
That renewed concerns about the timing and magnitude of interest rates cuts, a day after the Reserve Bank of India kept monetary policy steady citing inflationary pressures, including from the government finances. "Markets would not take this budget positively, as nothing is done on subsidy side, even power reforms are for name sake," said Aneesh Srivastava, chief investment officer of IDBI Federal Life, which oversees 25 billion rupees in Indian equities.
"The budget is neither populist nor reformist. It's disappointing," he added. The main 30-share BSE index fell 1.2 percent to close at 17,466.20. The 50-share Nifty index also lost 1.2 percent to end at 5,317.90. Both indexes ended the week with modest losses.
Oil explorers were among the leading decliners. The CNX Energy sub-index dropped 3.3 percent, marking the biggest falls among sectors, after the budget proposed raising the tax on production, or cess, on crude oil to 4,500 rupees per tonne from 2,500 rupees per tonne. Oil & Natural Gas dropped 4.7 percent, while Oil India lost 4.5 percent. Meanwhile, Reliance Industries dropped 3 percent, with traders citing an absence of reforms on natural gas pricing in the budget.
The Indian energy conglomerate was also hurt after Canadian oil and gas producer Niko Resources said it posted a quarterly loss on lower production from the D6 block off India's east coast, which is majority-owned by Reliance. Gold-related stocks were hurt by the budget after the basic customs duty on the yellow metal was doubled. Manappuram Finance Ltd lost 3.6 percen. But among gainers, ITC Ltd jumped as much as 7.9 percent to a record high of 225 rupees after the government proposed raising the excise duty on cigarettes by less than expected. Shares ended up 3.5 percent. Those gains helped push up the food and consumer goods sub-index up by 1.9 percent, making it the biggest gainers among CNX indexes.