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Union Budget 2017 - A positive one for the equity markets says Prakarsh Gagdani, CEO, 5paisa.com

Prakarsh Gagdani

25 Sep 2017

Finance Minister Mr. Arun Jaitley presented the Union Budget 2017 yesterday which was a positive one for the equity markets. In his speech, Mr. Jaitley highlighted that India is moving towards a formal economy post demonetisation and that it was a bold and decisive measure in order to create a new ‘normal’ wherein the GDP would be bigger, cleaner and real. The government has set a fiscal deficit target for FY18 & FY 19 at 3.2% and 3% of the GDP respectively. This will reduce the government borrowings and hence would result in reduction in interest rates. The capital expenditure is increased by 25.4% for FY17-18 over the previous year, which will boost the economic growth and generate employment. All-in-all it was a good budget for both common man and equity markets.

Here are some highlights of the Budget which will impact Broader Economy and markets as a whole:

  • The FM has announced strong incentives for affordable and rural housing thereby giving infra status to these projects. Investment in this sector generates employment and will have a positive impact on sectors like steel, cement etc. Companies like Everest Industries and Visaka Industries to benefit.

  • In a relief to equity investors, long term capital gains tax structure was remained untouched by the FM. Markets gave a thumps up to this and Nifty and Sensex surged by 155 points and 486 points respectively.

  • Agriculture credit target increased to Rs. 10 lakh Cr for FY17-18 from Rs. 9 lakh cr in FY16-17. Positive for companies like Jain Irrigation, Rallis India.

  • Some relief was provided to banks, especially PSU banks as the permitted provisioning for non-performing assets was increased to 8.5% from 7.5%.

  • Basic customs duty on LNG reduced from 5% to 2.5% - Companies like Petronet LNG, Mahanagar Gas to benefit from it.

  • The government plans to list PSUs like IRCTC, IRFC and IRCON on the stock exchanges. This will raise resources for the government and offer good quality securities to new money in the market.

  • In addition, government intends to create an integrated public sector ‘oil company’ which will be able to scale to large international players.

  • FIPB has been abolished which is a big reform step to support growing foreign direct investments in India.

  • The income tax rate for individuals who come in the income bracket of Rs. 2.5-5 lakh has been cut to 5% from 10%. This means that taxpayers of all categories will get a uniform benefit of Rs. 12,500 per person in each fiscal year, thereby increasing savings and consumption. Consumer Durable stocks like TTK Prestige and Whirpool to benefit.

  • In order to strengthen the MSME sector, the tax rate for companies with an annual turnover of up to Rs. 50 crore has been reduced to 25%.

The biggest positive in the budget was the government continuing with the fiscal consolidation roadmap. This will help build policy credibility. We believe that continued tight fiscal policy will help keep inflation low and allow RBI to eventually cut rates. We expect 25bps rate cut by the RBI next week. In the next 12 months, we expect Nifty & Sensex to reach the level of 9500 and 30500 respectively.

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Union Budget 2017 - A positive one for the equity markets says Prakarsh Gagdani, CEO, 5paisa.com

by Santosh Jayram | Feb 03, 2017

Finance Minister Mr. Arun Jaitley presented the Union Budget 2017 yesterday which was a positive one for the equity markets. In his speech, Mr. Jaitley highlighted that India is moving towards a formal economy post demonetisation and that it was a bold and decisive measure in order to create a new ‘normal’ wherein the GDP would be bigger, cleaner and real. The government has set a fiscal deficit target for FY18 & FY 19 at 3.2% and 3% of the GDP respectively. This will reduce the government borrowings and hence would result in reduction in interest rates. The capital expenditure is increased by 25.4% for FY17-18 over the previous year, which will boost the economic growth and generate employment. All-in-all it was a good budget for both common man and equity markets.

Here are some highlights of the Budget which will impact Broader Economy and markets as a whole:

  • The FM has announced strong incentives for affordable and rural housing thereby giving infra status to these projects. Investment in this sector generates employment and will have a positive impact on sectors like steel, cement etc. Companies like Everest Industries and Visaka Industries to benefit.

  • In a relief to equity investors, long term capital gains tax structure was remained untouched by the FM. Markets gave a thumps up to this and Nifty and Sensex surged by 155 points and 486 points respectively.

  • Agriculture credit target increased to Rs. 10 lakh Cr for FY17-18 from Rs. 9 lakh cr in FY16-17. Positive for companies like Jain Irrigation, Rallis India.

  • Some relief was provided to banks, especially PSU banks as the permitted provisioning for non-performing assets was increased to 8.5% from 7.5%.

  • Basic customs duty on LNG reduced from 5% to 2.5% - Companies like Petronet LNG, Mahanagar Gas to benefit from it.

  • The government plans to list PSUs like IRCTC, IRFC and IRCON on the stock exchanges. This will raise resources for the government and offer good quality securities to new money in the market.

  • In addition, government intends to create an integrated public sector ‘oil company’ which will be able to scale to large international players.

  • FIPB has been abolished which is a big reform step to support growing foreign direct investments in India.

  • The income tax rate for individuals who come in the income bracket of Rs. 2.5-5 lakh has been cut to 5% from 10%. This means that taxpayers of all categories will get a uniform benefit of Rs. 12,500 per person in each fiscal year, thereby increasing savings and consumption. Consumer Durable stocks like TTK Prestige and Whirpool to benefit.

  • In order to strengthen the MSME sector, the tax rate for companies with an annual turnover of up to Rs. 50 crore has been reduced to 25%.

The biggest positive in the budget was the government continuing with the fiscal consolidation roadmap. This will help build policy credibility. We believe that continued tight fiscal policy will help keep inflation low and allow RBI to eventually cut rates. We expect 25bps rate cut by the RBI next week. In the next 12 months, we expect Nifty & Sensex to reach the level of 9500 and 30500 respectively.

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