A Friendly Union Budget May Be On The Cards

The long queues outside branches and ATM kiosks of the banks are slowly but steadily reducing by length while banks have just started encouraging big-ticket cash withdrawal across the counters. Things, two months since demonetisation move undertaken by Narendra Modi-led NDA government have started showing positive signs with crores being seized from black money holders. Hundreds of cases against errant citizens have been filed by law-enforcing agencies on charges related change of old currencies to new ones in illegal methods, sitting on huge amount of black money and not paying taxes. Irrespective of political chaos at this time ruling across the country, things have started stabilising. Though situation could have been better after 50 days since the crucial move, but it is not looking that bad also at this time of going to print. Meanwhile, elections in five states including Uttar Pradesh have been announced on January 4—all eyes will be on the political developments in those states while we are anxiously waiting to read through the union budget document so far scheduled to be tabled in the Parliament on February 1. Discussions in the national capital over rolling out of GST this April are also in the final stage and though certain states have expressed their concern, mostly political in nature, about the timing, India Inc. is excited over the days to come. It will not only simplify the taxation process but will also bring the entire country’s business transactions under a unified tax regime. 

Talking about the union budget, I believe the broad theme behind this budget will be taxation spanning from benefits to individual taxpayers and at the same time bringing down the corporate tax rates which was earlier highlighted by the Finance Minister in his previous budget speech, almost a year back.

In my reading, RBI is likely to bring down interest rates further downwards as all the commercial banks in the country are currently overflowing with money which ultimately needs to be given out as loans. From the undisclosed income, which the government is likely to receive at the end of this humongous demonetisation drive, which according to some rough estimates is pegged at around Rs 3 to 4 lakh crore will flow towards both economic and social infrastructure along with defence expenditure in the coming times. This budget will be high on content and will lay down the roadmap till the end of NDA government’s tenure in the office. Government in most likelihood will refrain from any type of populist measure in the lead up to the state elections especially with that off Uttar Pradesh.

In my view sectors, which seems to be nicely poised given the budget expectations are banking, cement, steel, tourism, NBFCs and select auto ancillary companies and lastly pharma companies which have less exposure to US markets. Above mentioned stocks in my view are likely to be in focus leading up to the union budget. In this edition of your favourite investment fortnightly, we have dedicated a section on budget expectations of the India Inc. I am sure you will find it as an interesting read. We have also brought an exhaustive story on future of gold as an investment instrument—I am sure the report will guide you through your investment decisions in this year. 

Going forward Q3 results are expected to be a muted one considering the impact of demonetisation on various sectors. At this juncture, I expect markets to remain strong in 2017 with many interesting events lined up throughout the year.

Wish all our readers a very happy 2017. Let us have a prosperous and healthy year together.