Market reaction on the budget

RiteshJain, CIO, Tata Asset Management ltd.

The 2016-17Union Budget has a clear thrust for the rural economy while taxing urban andthe top of the pyramid consumption. It carries the highest ever allocation toMNREGA remember, MNREGA expenditure had been coming down in the last 3 yearsadding to the rural stress. Allocation to the agriculture and allied sector hasbeen increased but the subsidy route has been avoided (efficient spending)while thrust is on job creation. The good thing is that the government issticking to its initial disposition of clampdown on black money, subsidyrationalization and push for job creation.  Various estimates have put theblack economy at par with and even higher than the real economy. The thrust onbringing back black money into productive use in the real economy canrejuvenate the economy and put us back in growth trajectory. This budget has aclear emphasis on making taxes more efficient, reduce opaqueness in tax disputehandling .While the budget is structurally positive in medium term, no room tospend and a tight fiscal stance could act as a dampener for capital markets. Ashas been in the past, execution remains the key.

AtulKumar, Head-Equity Funds, Quantum AMC

Largely,the budget addresses rural and agriculture sector. This was probably expected,given the higher stress that farmers are facing. They have also announced anumber social schemes such as health insurance etc for lower income segment as a result there can be higher consumption  from rural areas andthis could correct the lopsided growth that the economy is witnessing.

Onepositive point has been of fiscal deficit target; government will adhere to 3.5% fiscal deficit in spite of various challenges such as 7th Pay Commission, OneRank One Pension (OROP).

 A number ofmeasures has been announced which will lessen tax  hassles and also end to  retrospective taxes. Measures around these are welcome asbusinesses face a number of problems with tax authorities. There has not beenmuch in the budget for corporate India. Even on the infra spending the numbersare not very high.

AnupBagchi, MD&CEO, ICICI Securities

The budgetemphasizes the Growth Grid (Governance, Reform, Social Infrastructure &Investments, Fiscal Discipline) using nine distinct pillars to transformIndia. Overall a good budget which focused on immediate easing of agriculturalstress and encouraging long term economic growth.

DineshThakkar, CMD Angel Broking

In thebackdrop of a challenging global economic environment, we believe the FinanceMinisters main focus has been to reiterate Indias commitment to stableeconomic and fiscal policies. Foreign investors are likely to derivesignificant confidence from the fact that the fiscal deficit is likely to bereigned in at 3.5%, and that Indias growth is not dependent on short-sightedfiscal over-spending. The restrained budget also means that interest rates arelikely to come down further in the coming weeks. Moreover, market worriesregarding long-term capital gains tax proved unfounded too. The governmentsfocus on plan expenditure and infrastructure continued, as evidenced by thesignificant increase expected in irrigation coverage acreage, as well as focuson roads and ports. Overall, the budget accommodates Pay Commissionrequirements and higher plan expenditure, without breaching the deficit andachieves this with credible numbers, which would be the key positivehighlights.

SatishMenon, Executive Director, Geojit BNP Paribas Financial Services Ltd

Budgetsprime emphasis is on the rural economy / population and also on infrastructurespending. Both of these could go a long way in increasing the GDP of India withtotal inclusion. Adherence to 3.9 % Fiscal deficit and 3.5 % for next yearwould bring comfort to FII.  The key to the budget is its implementation.

No bad newson the LTGC was good news to the stock markets. On the negative side, expectedreduction in corporate tax rates have not yet materialised.

SunilGodhwani, Chairman & MD, Religare Enterprises

Overall thebudget is a good and well balanced one. The narrative is structured andelaborates and has attempted to do everything by ticking almost all the rightboxes. It balances economic growth and fiscal consolidation concerns aroundinflation, and hence sustainability of the economic growth path. The other bigpluses would be items which were expected but did not get announced i.e. noincrease in service tax and no increase in the holding period for long termcapital gains.

KaushlendraSingh Sengar, Founder & CEO, Advisorymandi.com

Budget isnot up to the Expectation from the Stock Market Point of View. As PSU banks arein huge losses and Finance Minister says Rs 25,000 cr for bank recapitalization(less than expected, so negative for PSU banks), People earning more than Rs1crore will now see the surcharge on income tax go up to 15% from 12%, while foran annual dividend income of Rs10 lakh or more, an investor will pay DDT of 10%and India is the only country who is imposing this tax. And Instead ofdecreasing STT and CTT FM has increased the STT on options will be againagainst the market expectations and leads to decrease in Option volumes. Theseall will leads to decreasing in volume in Stock Market.

ShreyJain, Founder and CEO, SASOnline.in (South Asian Stocks)

Raising theSTT on options comes as a surprise . This would surely increase the impact costfor the average trader . We expect traders will feel the pinch and shift from traditionalbrokerages to discount brokerages to offset this increase in trading expenses.For the market makers who provide for liquidity in the market this would proveas a deterrent as their margins would be impacted . However introduction ofother derivative products in the commodity markets would give further venuesfor expansion and revenue growth. Further w.r.t 10 percent tax on dividend inaddition to DDT if dividend more than Rs 10 lakh a year, corporates would bebetter off deploying profits for business expansion rather than payouts topromoters which would help revive the capex cycle .

VikasGupta, Executive Vice President and Chief Investment Officer at ArthVedaCapital

The budgetdelivered according to our expectations with respect to the push towards ruralsector and public investment in infrastructure like road & railways.Another positive was no slippage on fiscal deficit which shows governmentsintent to rein in the fiscal deficit. However it fell short of the expectationson allocation towards recapitalization for public sector banks especially giventhe NPA mess.  

The sectorswhich in our view are expected to benefit from the budget are:

a)     2 wheeler stocks to benefit from rural spending

b)     Fast moving consumer goods to benefit from surge in rural incomes

c)     Infrastructure companies involved in road sectors

d)     Cement sectors to benefit from infrastructure spending on roads, railways andlow income housing

ArunGopalan, Vice President, Research at Systematix Shares & Stocks  

At firstsight, we look at the Union Budget as a successful one, given the currentglobal scenario, the space to maneuver was rather limited. But despite that, wefeel there is something in it for everybody. The Government has done well tohave maintained the Fiscal Deficit at the targeted levels of 3.5% of GDP andhas retained the target for FY17 at 3.9%. This is a major positive as it wasbroadly expected that the FM might have to stretch the fiscal a little toaccommodate some expenditure to spur growth.

Theagricultural space and rural economy have been addressed with a bounty.TheInfrastructure space has been well addressed with an outlay of Rs.221,246cr.Though the Income Tax slabs have not been raised, the small taxpayer wouldbenefit from the raising of the deduction u/s 80G by Rs.36,000, on rent paid bythose not owning a house is a welcome relief. The increase in surcharge by 3%on those earning income exceeding Rs.1 cr per annum is not much of a pinch, aswe were expecting a touch of Thomas Picketty in it.

JasmeetSingh Chhabra, Managing Partner, Cerestra Advisors Limited 

Nine (9)pillars of growth as stated by the finance minister, is a paradigm shift in theway we look at structural strengthening of the economy. This would go a longway to bring a well-rounded sustainable economic well-being to the nation.Having stated Education & Skills as a growth pillar, certain concessionsaround service tax waiver in line with the rest of education sector foreducation infrastructure providers would have been helpful as well. The otherpositive is the move to remove DDT (Dividend Distribution Tax) hurdle to makeReal Estate Investment Trusts a reality, Waiver for DDT for income distributionthrough REIT/INVITs lays the road for creating effective and robust REIT marketin India. A great positive for the capital starved real estate sector.

DineshRohira, Founder & CEO, 5nance.com

A fiscallydisciplined agrarian budget, with a focus on the masses is the best way todefine Union Budget 2016-17. This budget largely focuses on socio-economicreforms with an eye on long term sustainable growth.  Ruralinfrastructure, agriculture, healthcare, education, ease of doing business andstart-up tax reforms stand out as the core takeaways from the budget that actsa model for long term vision and sustenance.

The fiscaltarget of 3.5% is the single largest positive take away from this budget, thatgoes out to say that the government is serious about what it commits, settingthe path for RBI to carry out a rate cut in the near future, more importantlysending the right message to global investors and rating agencies. This 1single step can lead to Indias rating being looked positively by globalagencies, as it sets the tone for the future years of this regimes commitmentto the FRBM act and thereby setting the desired tone for long term globalinvestors.