Anoop Bhaskar, Head- Equity, UTI Mutual Fund, says the 2011-12 budget is mildly positive but crude oil at $100 per barrel could cap the equity market rally. He answered an emailed questionnaire from Cafemutual that sought his views on the budget
What will be the overall impact of the budget on the stock markets?
Given the low expectations and lack of any major negative in the Budget, the immediate reaction will be positive. However, with crude oil running at close to $100 levels, any geo-political flare ups in the Middle East could put a cap on this rally.
Any sectors that will require a re-rating as a consequence of the budget announcements?
Autos and consumer staple, especially tobacco, had been under strain. The decision not to raise excise duty on these would be a positive as underlying demand remains strong.
How significant is the easing of the procedure for QFIs, FDI investments in Indian mutual funds? In your opinion, how will it impact the inflows in the mf industry?
It could be a positive in the medium to long term. It could also require Portfolio Managers in domestic MFs to become more "style" pure and lower their churn / portfolio turnover ratio. It may place certain fund houses with foreign pedigree at an advantage, at least initially.
Has the budget made the case for investing in equity funds stronger?
Equity investments need to be based on valuations and outlook rather than periodic events like the union budget. At current valuations 15x forward, historically, investors have made positive returns on a 12m / 24m / 36 m basis.
Finally, how would you rate this budget in terms of its impact on the mutual fund industry?
Mildly positive.
