While the budget 2017 did not have anything specific to offer to the MF industry, the Finance Minister Arun Jaitley has proposed a number of measures to accelerate the growth of the economy. Here’s what fund managers and experts have to say about the union budget 2017.
Navneet Munot, CIO, SBI MF
Prima facie, we think that the overall fiscal arithmetic is credible.
On the taxation front, three strong positives came in the form of reduction of corporate tax to 25% for small business, no service tax hike and no increase in holding period for availing long-term capital gain tax in shares.
The union budget has managed to curtail the net market borrowing to Rs. 3.6 trillion as it increasingly resorts to small savings funds to finance the fiscal deficit. However, bond market may remain largely un-impacted by the budget given the overhang of SDLs and supply of UDAY discom bonds and GoI serviced bonds.
With the event now behind us, the focus will shift back to the execution, corporate earnings and global cues.
Pradeep Gokhale, senior fund manager, Tata Mutual Fund
The key feature of the budget is focus on stability and continuity. Fiscal discipline remains the focus and there are no major changes in tax policies, particularly related to capital gains. The budget does not contain any populist measures as was feared in some quarters. Measures to improve transparency in political party funding is a bold reform. Higher spending on rural and infrastructure and focus on affordable housing, without compromising on fiscal deficit, are welcome steps. Overall, a positive budget for the economy and markets.
SN Lahiri, CIO, L&T Mutual Fund
The relevance of budget for the equity markets has reduced in last couple of years. There is something for everyone in this budget. In addition, the target of keeping fiscal deficit at 3.2% of GDP is encouraging for the corporate world.
There will be increased participation in infra sector particularly with the increased allocation of Rs.3.96 lakh crore.
Lakshmi Iyer, CIO, Fixed Income, Kotak MF
The biggest positive is the discipline. The Finance Minister has not compromised with the fiscal deficit targets and the numbers given are realistic. I think this would send positive message to the markets.
Kumaresh Ramakrishnan, Head-Fixed Income, DHFL Pramerica MF
Benchmark bond yields inched marginally higher post the budget. However, the budget in our view has managed to achieve the difficult balance between fiscal prudence and some additional spending to push growth and fill in for the private sector slack. Even as the fiscal borrowing numbers are mostly market neutral, the proposed bond buybacks most of which is likely to happen at the front end 2019/20 should help the short end a little more. Prevailing surplus liquidity conditions as a fall out of demonetisation, should also continue to keep the overnight rate soft.
EA Sundaram, ED & CIO-Equities, DHFL Pramerica MF
Fiscal deficit target of 3.2% in FY18 and 3% in FY19 shows fiscal prudence which will help contain inflation and lower yields which should be positive for the Banking sector. Additionally changes in the provisioning requirements for non-performing loans and accounting standards to accrual from cash basis and capital infusion of Rs 10,000 crs for PSUs are all positive developments for the Banking sector.
No change in long term capital gains tax is positive for equity markets and accommodative for equity arbitrage & hybrid funds which will continue to benefit from equity taxation laws for investment holdings of one year or more.
Clarification on the outstanding issue of indirect transfer taxations of FPI investments in Indian listed companies removes the overhang from the markets and will be viewed positively by foreign investors. This should facilitate incremental FII flows into India.
