The budget for 2018-19 has reinforced the government’s agenda to bring reforms and improve macros. The FM maintained FY2018 fiscal deficit target of 3.5% and has set a target of 3.3% for FY2019, which is slightly higher than the earlier target of 3%. However, with improving tax compliance and GST collection, the target looks achievable. In this Budget, FM has particularly focused on strengthening agriculture and rural economy by way of MSP support and fund
allocation for various rural related infrastructure programs to boost the distressed rural economy. In the budget, FM has announced 10% long term capital gain tax on equity investments over `1lakh, which is slightly negative for market in the near term. However, in our view, equity investments still remain the most attractive asset class compared to others like fixed deposits.
We believe that this budget is overall neutral for markets. However, on the
positive side, the FM has not stretched Fiscal deficit target by announcing unproductive measures like loan waiver schemes, as the previous government did in past budget. Going forward, we expect the market would perform better on the back of growth in corporate earnings. Further, credit growth is showing recovery, inflation is looking manageable and global economy continues to be buoyant. Moreover, current
government has initiated many other reforms likes GST, Jan Dhan Accounts, IBC and
recapitalization of PSU banks which should be overall positive for Indian economy.
In this Budget, we have observed that government remained mainly in focus on rural, housing and infrastructure. Angel Top-Picks portfolio already has exposure in these sector stocks which are well placed to capture the budget benefits (like Asian Granito, Century Plyboards India, Dewan Housing Finance, GIC Housing, Siyaram Silk Mills). Going ahead, we expect GDP growth would be more visible due to strong reforms
taken by government, in addition to buoyant global economy. We expect the strong
growth in consumption sectors to benefit the stocks in our Top-Picks like LT Foods, Blue
Star, KEI Industries and Maruti Suzuki.
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