Navneet Munot, CIO, SBI Mutual Fund
The government has sided with fiscal prudence. FY 2019-20 fiscal deficit is projected at 3.3% of GDP, lower than fiscal deficit target of FY 2018-19. However, the revenue assumptions seems to be marginally on the ambitious side. Now, markets’ hope hinges on improving the GST compliance. The final decision on RBI capital reserves will also be closely watched.
Fixed income market has cheered the budget as the market borrowings had been adhered to and the budget has proposed the idea of financing a part of fiscal deficit through dollar bonds.
For the equity market, the move to infuse additional capital to public sector banks, measures to address the NBFC challenges, increasing the regulatory powers of RBI over NBFCs and HFCs, the focus on further liberalizing the FDI in select sectors, continued thrust on infrastructure activity are some of the positives that may bring cheer to the related sectors. On the other hand, the government has refrained from any significant boost to rural spending capabilities, and hence does not bring any meaningful thrust to consumption spending. The suggestion to SEBI to increase float to 35% from 25% will cause high supply of stock but may also increase India’s weight in the global indices.
Suyash Choudhary, Head – Fixed Income, IDFC Mutual Fund
As with almost all budgets, revenue numbers will still get challenged, especially given the ongoing economic slowdown. However, this is a creditworthy optimising given constraints and leaves the bond market reasonably satisfied. Also noteworthy is the fact that the RBI has seemingly been sympathetic towards some fiscal expansion and would likely have not considered this as a constraint for further easing.
However, now with the finance minister actually showing further consolidation, the trigger for further monetary easing becomes even stronger. This alongside RBI’s move to positive liquidity (core system liquidity is already around Rs.80,000 crore positive and is likely to go towards Rs. 2 lakh crore by September post RBI dividend) and the global backdrop of sharply lower yields paints a continued bullish environment for quality interest rates.
Dwijendra Srivastava, CIO – Debt, Sundaram Mutual Fund
Contrary to market expectations, the government revised the fiscal deficit target downwards at 3.3%. This was a positive for bond markets. Moreover, debt markets also reacted positively to the government announcement of launching offshore sovereign bonds.
Thus in current scenario, investors with more than 3-year horizon can allocate a small portion of his debt investment to long duration fund while investing the core debt portfolio in short to medium term funds.
Arvind Chari, Head – Fixed Income & Alternatives, Quantum Mutual Fund
The fact that there is nothing inflationary in this Budget eases the RBI’s decision for a rate cut of 25 bps. However, I would not recommend duration bonds as the gilts market has already rallied and the fiscal deficit target is difficult to adhere to, given the ambitious revenue collection target.
For now, I would recommend liquid funds and short-term funds.
Manish Gunwani, CIO – Equity Investments, Reliance Nippon Life Mutual Fund
Since the government has adhered to fiscal discipline, it gives enough headroom for the RBI to ease policy rates by 50 bps or more in the remaining FY2019-20. Overall, the budget is well balanced and the reform process is likely to continue.
Akhil Mittal, Senior Fund Manager, Tata Mutual Fund.
The government has laid steep revenue target on disinvestment. CPSE ETFs have been successful to a large extent and government is looking for greater participation from general public on this account. Hence government will offer an investment option on lines of ELSS (tax breaks) for ETF investing in CPSEs. This should encourage long term investments in CPSEs and also provide an alternate investment option to retail investors which is tax efficient.
The government would also allow concession on STCG tax in addition to extending concession on LTCG tax on fund of funds set up for disinvestments in CPSEs.
The government has proposed tax benefits for MFs in IFSC in GIFT City and also on income distributed by MFs derived from transactions on stock exchanges set up in such IFSC in Gift city. This looks good visionary step but might not translate to immediate actionable.
In order to provide support to NBFCs reeling under current macro risk off environment, the government has offered partial credit guarantee scheme for 6 months investment by banks into securitized assets of such NBFCs. Though this might not look like a direct benefit to NBFCs, it would make banks look at securitizable assets of such NBFCs more favourably.
