Budget evokes mixed reactions from market experts

Written by PTI | New Delhi | Updated: Jul 11 2014, 01:29am hrs
BudgetThough the country is seen as an attractive destination for investment, documentation created a hurdle.(Thinkstock)
Budget 2014-15 has received mixed reactions from stock market participants, with some terming it as "well-balanced", while others said it lacked big-bang announcements.

"Though the country is seen as an attractive destination for investment, documentation created a hurdle. The proposal to introduce uniform KYC norms and inter-usability of KYC records will definitely encourage foreign investment.

"Moreover, the clarification that income arising to FIIs/FPIs from transaction in securities market will be treated as capital gains will be helpful," PwC India executive director Suresh Swamy said.

Accordingly, characterisation of income of FII/FPI will no longer be an issue. Fund managers may now be able to relocate to India without creating additional tax risk for the funds they manage. This may also lead to increase in economic activity and thereby aid revenue and tax collection, Swamy said.

To energise capital markets, the government today proposed a slew of measures, including tax benefits and easier regulations for foreign investors and corporate bonds besides creating a new instrument Bharat Depository Receipts.

BSE MD & CEO Ashishkumar Chauhan said, "The Finance Minister has done an excellent job despite having only 6 weeks to prepare his first budget. The biggest positives have been containing fiscal deficit and GST implementation time frame."

Overall, big picture looks good and he has managed to make his mark in the history of Indian budget presenting in his own subdued and mature way, he added.

However, after a heady swing of 800 points intraday, the market ended on a negative note and the Sensex ended 72 points or 0.28 per cent down at 25,372 and the Nifty fell 17.25 points or 0.23 per cent at 7,567.75.

"It is a very good budget as a new step by the new government, over the near-term we are likely to see change in existing norms. The maiden budget comes amid very high expectations from both general mass and industry.

"Considering the huge mandate it has lot of populist expectation, growth and fiscal consolidation," said Vinod Nair, Head Of Research, Geojit BNP Paribas.

"...The new budget is clearly positive in terms of lower individual taxes, positive for many sectors like infra, power, realty and reviewing subsidy," Nair said.

According to Nomura analysts Sonal Varma and Aman Mohunta, "Budget is a mixed bag. The government did not use the opportunity to come clean on subsidies, which is a disappointment."

On the other hand, Rakesh Goyal, Senior Vice President, Bonanza Portfolio said, "As expected, the new government didn't come up with any big-bang changes to what was introduced in the interim budget by UPA government.

"However, markets are disappointed on the fiscal consolidation front. The budget didn't speak anything about the rationalisation of subsidies which was widely expected by most market players."

According to S N Baheti, MD & CEO, IDBI Asset Management: "The Budget provides strong stimulus to several strong pillars for sustainable economic growth. Budgetary focus on infrastructure sector, savings and investments will play a catalytic role."

The markets can continue to look forward to an improving outlook for the economy, spelling positive for equities, Angel Broking chairman Dinesh Thakkar said.

"Infrastructure, real estate and financial sectors are amongst the biggest winners, with measures to improve funding availability to infrastructure and low-cost housing and providing a boost to REITs and bank infra lending," Thakkar said.

"We believe the government could have been more aggressive in the disinvestment target. While the idea of selling shares in state-run banks to retail investors is interesting, we would have to wait and watch the pricing on such share sales," Anand Rathi Financial Services MD Amit Rathi said.

The Finance Minister proposed a number of measures to energise the capital markets. Easing of policies will boost the markets, WealthRays Securities Director Kiran Kumar Kavikondala said.

Another market expert, Brijesh Mehra, MD and Head of International Banking, India and SE Asia, RBS said, "The Finance Minister has delivered an all encompassing budget, which looks at reviving growth while keeping to the path of fiscal consolidation via subsidy control.

The key message delivered by him is the new government endeavours to create a more conducive policy environment for business, especially in case of taxation policy."

Given that there was limited space for fiscal support to the economy at large, the overall focus of the budget has been to provide a roadmap on the policy front over the next 5 years, Mehra said.

Naveen Mathur, Associate Director- Commodities & Currencies, Angel Broking said, "The NDA government has presented an excellent, pragmatic and a balanced budget indicating pro-growth measures by giving boost to agriculture and infrastructure.

"Markets were also hoping for a reduction of import duty on gold since CAD has declined sharply partly due to measures taken by the government and the RBI. However, the government instead adopted a wait and watch approach with no changes in import duty structure defying market expectations. All and all this budget gives us the hope for a bright future of our country tomorrow," he added.