'FMCG, auto, agri among 5 sectors to track after Budget, RBI policy'

Shreyansh N Mehta

Interim Budget held huge expectations and was widely expected to be a pro-poor and pro-farmer one since this was the last budget of the PM Narendra Modi-led NDA government before the general elections.

The did not disappoint as it tried to touch a large part of the population specially targeting the farmers, salaried middle class, rural citizens and unorganised sector workers apart from which it showcased the report card of last four and half years and governments’ vision for “New India” for the upcoming years.

Although some of the market expectations like increasing the tax slabs, changes in STT and LTCG apart from higher limits for the exemptions under Section 80C were not met, but we believe that the budget was pragmatic and tried to make a balance between growth and fiscal prudence.

Shreyansh Mehta

Manager Equity Research|AUM Capital Market

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From housing, education to healthcare, direct income for farmers, mega pension scheme for the unorganised sector, increased spending on the animal husbandry and fisheries sectors, relief to the MSME sector, reforms in stamp duty, high budget allocation for defence, single window clearance for Indian filmmakers and other social sector schemes were some of the major highlights of the budget that clearly showed the government's focus towards growth of the lower section of the society.

Tax reform for the salaried and middle-class taxpayers was the masterstroke. Series of tax perks were announced to relish for the middle-class taxpayers including tax rebate up to Rs 5 lakh, increase in standard deduction, increase in gratuity limit, exemption from income tax on notional rent on a second self-occupied house, raised TDS threshold on interest earned and increase in rollover of capital gains on sale of house property.

This would raise the disposable incomes at the risk of high fiscal outlays, which might add to the fiscal deficit but the government is in support of tackle the situation.

Further, more than expected RBI’s MPC has changed its stance along with a rate cut to boost a slowing economy and signalling more rate cuts in future. Thus, the combined impact of reflationary budget with ease in monetary policy will provide a boost to consumption.

Overall, the Budget neither had much surprises nor any big announcements but had the necessary caution and intent to revive growth in the economy. However, at a time when the slowdown in global economic activity and potential trade wars with an agenda for the upcoming elections followed by the intent of ‘New India by 2022’ - this probably is the best that the FM could have delivered.

Market outlook after Interim Budget and RBI policy

Till the Lok Sabha election markets will remain volatile and may continue its corrective move. Global events and news flow will tighten grip on the market as market players will closely track on any news related to Brexit, US–China trade talks and crude oil prices.

Domestically, almost many companies have declared their Q3 results where most posted lower growth. Most sectors are witnessing a slowdown in growth or facing price corrections in the underlying commodity prices or companies are bitten down on corporate governance issues.

In such scenario, Indian indices are mainly supported by a limited number of stocks. There is severe correction in various mid-cap and small-cap stocks. Nifty will continue to remain in a range of 10,600 to 11,200 till elections. So investors should invest in fundamentally sound companies.

Indian markets are consolidating and decent stock valuations are opening investment opportunities for long-term players. After the Interim Budget and RBI’s MPC meet, stocks of FMCG, auto, agriculture, hospitality and real estate sectors should be tracked.

The author is Manager Equity Research at AUM Capital.