The interim FM Piyush Goyal presented a budget which was fiscally balanced, focus on rural spending, bonanza for middle-class, and had something for real estate & MSME segments
The Interim Budget 2019 had something for everyone — focus on rural spending, bonanza for middle-class, incentives for real estate & MSME segments, and was fiscally balanced with fiscal deficit target at 3.4% for FY19.
The Central government bias appeared to be clearly tilted towards populism ahead of the general elections due in April-May 2019 post the weak performance in recent state elections and concerns about farmer distress.
“It is an election budget aimed at winning back its core constituency of the urban middle class,” VK Sharma, Head PCG & Capital Markets Strategy, HDFC Securities told Moneycontrol.
“We have seen political parties promising the moon to the electorate ahead of the elections. At least these schemes appear to be grounded in reality. I believe that the steps taken in the Budget apart from catalysing growth in the economy will also touch the lives of crores of people in a meaningfully positive way,” he said.
One big factor which supported the market sentiment was the fiscal deficit number which got breached by only 10 bps and was revised upwards to 3.4 percent of GDP, but the disappointment could come for FY20 estimates which was also kept at 3.4 percent compared to expectations of 3.1-3.2 percent which in other words mean more fiscal stress.
The S&P BSE Sensex reclaimed 36,000 while Nifty50 closed a tad below 10,900 on the Budget day. Infra, realty, auto are some of the sectors which put up a strong show on Friday.
“The government increased the FY19 fiscal deficit target by 10 bps to 3.4 percent of GDP, which was largely in line with market expectation. However, the government estimates that FY20 fiscal deficit will remain at elevated level of 3.4 percent of GDP, which was a deviation from the 3.1 percent of GDP projected in the medium-term fiscal policy statement last year,” Tanvee Gupta Jain, Economist, UBS Securities India Pvt. Ltd and Gautam Chhaochharia, Analyst, UBS Securities India Pvt. Ltd.
“The government pursued expansionary fiscal policy, seemingly prioritising populism over prudence. While this should help support consumption growth in FY20, it could further delay the recovery in capex cycle, which is seen as key to sustainable growth,” they say.
The journey looks slightly volatile for benchmark indices and investors should place their bets around individual stocks or sectors which are likely to benefit the most from the Budget, suggest experts.
Jayant Manglik, President, Religare Broking, said that Budget proposals are a positive for sectors related to consumption, which include FMCG, auto, consumer durables, banks and fertilizer/agri.
“Moreover, with several announcements pertaining specific to the Real Estate sector in the Budget, this sector will stand to be a beneficiary over the medium-to-long-term. Thus, sectors related to and dependent on Real Estate will also stand to gain and these include Paints, Cement, Ceramics, etc.,” he said.
Key proposals in the Budget to impact the BFSI segment are: a) boost to consumption spends, rural spends & measures for the real estate segment to support retail financing demand (including housing finance).
“Rural and lower end consumption will be the prime beneficiary given income transfers and tax cuts – Consumer Staples, 2-Wheelers, consumer durables and micro finance to benefit; 2) Real Estate, given Capital gains exemption under Sec 54 to be available on 2 residential houses instead of 1 i.e. No tax on notional rent of 2nd self-occupied house,” Shiv Diwan, Heads-Sales, Institutional Equities at Edelweiss Securities Ltd told Moneycontrol.Indian Union Budget 2019: What does the FM have up his sleeve in the run up to the General Elections? Click here for live Budget 2019 news, views, analyses and more.
