Overall this year’s budget 2017 also remained balanced like the last year.
Finance minister expectation of global environment:
- World economy faces uncertainty after major economic and political developments in last year.
- US Federal Reserve’s intent to increase rates in 2017, may lead to lower capital inflows and higher outflows from the emerging economies.
- Uncertainty around commodity prices (crude) has implications for the fiscal situation of emerging economies.
- Signs of retreat from globalisation of goods, services & people, as pressures for protectionism are building up.
Expectations for 2018:
- Fiscal deficit projected at 3.2% and govt. expect to hit 3% in 2019 – Good for markets
- Net market borrowing to Rs 3.48 Lacs Cr 2018 – 20% Lower
- Capital spending raised by 25.4% and total expense to be ~Rs. 21.5 T for 2018 – Good for Infra
- CPI to remain 2-6% as per RBI range
- Agri credit target at Rs. 10 T for 2018
- Disinvestment target of Rs. 72,500 Cr 2018
- 100% electrification by May-18
- Lending target under Mudra Yojana is Rs. 2.44 Lac Cr
- NHB to provide Rs 20,000 Cr for home loans – Good for HFCs
- Income tax on income bracket of Rs 2.5 – 5 lakh to be 5% from 10% – Benefit of Rs. 12,500
- 10% surcharge on individuals with taxable income between 50 Lacs to 1 Cr – Higher tax for wealthy
- Long-term capital gains tax on immovable property to be levied after 2 years instead of 3 years – Better for real estate
- Transaction above Rs. 3 Lac can’t be done in cash and max donation of Rs. 2,000 in cash for political funding
- Corporate Tax for MSME with turnover < Rs. 50 Cr reduced to 25% from 30% – Better MSME
- FIPB abolished – Faster Foreign Investment
- Allowable provision for bad loans in banks to 8.5% from 7.5% – Better for banking
- Affordable housing to be given infrastructure status – Better for affordable housing companies and HFC
- Halves import tax on LNG to 2.5 percent
- Defence: Rs. 2.74 Lac Cr Expenditure and Capital of Rs. 86,488 Cr
- Infra: Rs. ~4 Lac Cr – Good for Infra
- Transport: Rs. 2.4 Lac Cr – Good for Auto
- Rural, Agriculture and allied areas: Rs. 1.87 Lac Cr – Good for FMCG
- National and State Roads: Rs. 64,000 Cr – Good for Construction
- Railways: Rs. 55,000 Cr and 1 Lac Cr railway safety fund in next 5 years – Good for Rail companies
- Rural Jobs: Rs. 48,000 Cr
- Irrigation fund: Rs. 40,000 Cr – Good for Construction
- Rural Roads: Rs. 19,000 Cr
- PSU Banks: Rs. 10,000 Cr equity infusion
- Milk processing: Rs. 8,000 Cr over 3 years
- Rural Electrification: Rs. 4,800 Cr
- Youth training: Rs. 4,000 Cr
Impact of Investment:
Broadly, it looks that budget 2017 is going to benefit three types of companies:
- Infra and Construction related companies: You can think of buying an infra mutual fund like Kotak Infrastructure & Economic Reform Fund
- Consumption relation companies: You can think of buying consumption oriented mutual fund like Birla Sun Life India GenNext Fund
- Medium and Small companies: You can think of buying a small cap mutual fund like DSP BR Micro Cap Fund
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