The Union Budget of 2019-20 is the biggest event to watch out this week. Brokerages say the Budget, to be presented on Friday, is likely to be expansionary given the slowing economy. They expect measures to recapitalise public sector banks and also focus on the rural economy and affordable housing. The interim budget in February had targeted fiscal deficit for the ongoing financial year at 3.4 per cent of GDP but brokerages believe that finance minister
Nirmala Sitharaman may go for a one-off increase in fiscal deficit, and that such a move is unlikely to impact India’s sovereign rating. The Indian stock markets have been relatively muted in the run up to the Budget this time, partly due to the crisis in the non-banking finance space. Since May 23, when the Narendra Modi-led government scripted a decisive victory for the second time in national polls, the Sensex has gained 1.5 per cent. ET takes a look at expectations of brokerages from the upcoming Union Budget:
Anand Rathi
The brokerage expects the Budget to be expansionary, boosting consumption and investment through tax cuts and additional expenditure. The brokerage expects the finance minister to go for a one-off increase in fiscal deficit to Rs 8 lakh crore or 3.8 per cent of GDP, with the commitment to revert to fiscal consolidation next year. The expected budget-neutral market capitalisation would be positive for PSU banks, it said.
Bank of America Merrill Lynch
The firm expects finance minister Nirmala Sitharaman to try to boost investment by reducing capital costs without major fiscal impact. The interim budget’s fiscal deficit target of 3.4 per cent of GDP is likely to be retained, said BofAML, although it prefers 0.2-0.3 per cent of GDP of extra public spend. The bank expects the finance minister to earmark excess RBI capital to recapitalise PSU banks.
Centrum
Benign inflation trajectory coupled with the slowdown in consumption, exports and private investment establishes a strong footing for the government to defer the fiscal consolidation path for FY20 and announce economic stimulus package for reinvigorating growth impulses, said Centrum. The brokerage expects possibility of a downward revision in the targeted level of tax revenues and does not see much change in the divestment target.
10 terms you must know to be able to figure out Sitharaman's Budget
Budget alert!
27 Jun, 2019
Finance Minister Nirmala Sitharaman will present the Union Budget to Parliament on July 5, 2019. Ready for the D-day? You need to have a fair idea about these 10 terminologies in order to be able to understand the Budget better. Here is a quick lowdown.
Fiscal Deficit
27 Jun, 2019
When the government's non-borrowed receipts fall short of its entire expenditure, it has to borrow money from the public to meet the shortfall. The excess of total expenditure over total non-borrowed receipts is called the fiscal deficit.
Budget Deficit
27 Jun, 2019
Budgetary deficit is the difference between all receipts and expenses in both revenue and capital account of the government. Budgetary deficit is the sum of revenue account deficit and capital account deficit.
Finance Bill
27 Jun, 2019
The proposals of government for levy of new taxes, modification of the existing tax structure or continuance of the existing tax structure beyond the period approved by Parliament are submitted to Parliament through this bill. It is the key document as far as taxes are concerned.
Annual Financial Statement
27 Jun, 2019
Article 112 of the Constitution requires the government to present to Parliament a statement of estimated receipts and expenditure in respect of every financial year - April 1 to March 31. The annual financial statement is usually a white 10-page document. It is divided into three parts, consolidated fund, contingency fund and public account.
The domestic brokerage said that the budget is likely to focus on the rural economy and affordable housing. Edelweiss does not expect material changes on the tax front. The brokerage said it will be prudent to lift government spending that can offset slowdown in the private sector. Reflation should be prioritised over reforms for now, the brokerage said.
Morgan Stanley
The financial services firm said the government is likely to focus on maintaining continuity in policy and spending on schemes allocated as per the interim budget. Morgan Stanley estimates fiscal deficit for FY20 at 3.5 per cent of GDP against interim budget estimate of 3.4 per cent of GDP. The firm expects the government to address capital needs of state-owned banks in the Budget.
Phillip Capital
The brokerage expects the government to maintain policy continuity with focus on agriculture, rural development and infrastructure spending. Phillip Capital said the time is ripe for the government to opt for fiscal expansion as economic growth is weakening. Fiscal deficit of 3.6-3.8 per cent of GDP will provide additional funds of Rs 40,000 crore to Rs 85,000 crore and will not have any adverse impact on Indian sovereign rating, said Phillip Capital. The brokerage does not expect the government to offer meaningful tax rebates (direct as well as indirect).
Top technical stock picks for Budget week
Stock recommendations
30 Jun, 2019
Indian market last week continued to remain on the edge ahead of Union Budget and a much-awaited meeting between the US President Donald Trump and his Chinese counterpart Xi Jinping. With both the leaders agreeing to a trade truce, progress in monsoon and Budget remain the key factors that will guide Dalal Street this week.
Here are some short-term stock recommendations that give decent returns to investors during the Budget week:
DREDGECORP: Above 429 with a short-term target of 475
30 Jun, 2019
After a prolonged down move and some subsequent bottom finding, the stock is set to confirm its reversal. It is seen breaking out of a falling trend line resistance which begins from 479 and joins the subsequent lower tops. In the process, the stock has also formed a complex inverted head and shoulder formation, which is bullish. The RS line, when compared against the broader markets, has also reversed its trajectory and has penetrated its 50-DMA. With the price ending outside the upper Bollinger band, the possibilities of the stock making a sharp move have increased. Any close below 395 will be negative for the stock.
TATAELXSI: above 886 with short term target of 980
30 Jun, 2019
After peaking out and failing to clear double top resistance between 1490-1470 zones, the stock has remained under a
prolonged downtrend. The price has attempted to find a bottom in the 820-835 zones for over a couple of months, and it is now looking to move up and reverse the trend. The RS line has just penetrated the 50-DMA and is seen inching higher. The RSI has marked a fresh 14-period high,
which is bullish; it is seen breaking out of a formation. The MACD has shown a positive crossover and trades above its signal line. The weekly RSI has shown a bullish divergence against the price and is seen moving higher. Any close below 835 should be treated as a stoploss for this view.
NESTLEIND: above 11910 with a short term target of 12990
30 Jun, 2019
The stock is placed at an exciting juncture on both daily and weekly timeframe harts. The price has ended above the upper Bollinger band on both time frame charts. It shows the higher possibilities of the price resuming a sustained up move. Though some temporary pullback inside the band cannot be ruled out, there are higher possibilities of a breakout taking place. The stock has formed a bullish Ascending Triangle pattern on the weekly charts. The MACD remains in continuing buy mode. The RSI has marked a fresh 14-period high which is bullish and is seen
breaking out of a formation. Any close below 11300 should be treated as a stop-loss for this view.
CANBK: above 284 with short term target of 310
30 Jun, 2019
The PSU banks are seeing a
rally over the last couple of days in anticipation of fresh capital infusion in the banks. Among others, this stock remains interestingly placed. The price currently stays in a big Ascending Triangle formation. The RS line has sharply surged higher much before the actual breakout in
the price and in the process has penetrated the 50-DMA as well. The On-Balance Volume – OBV has already marked a fresh high before the price breakout, and this is bullish. The RS Line against the broader markets on the weekly charts has also penetrated the 50-period MA. Renewed momentum in the stock cannot be ruled out. Any close below 270 should be treated as a stop-loss for this view.