The Union budget does well to bring back the focus on what could be the two largest drivers of India’s economic transformation for the next couple of years -– the agriculture and food processing industry and the growth of the MSME sector, which includes large employment generators like textile, footwear and leather industry.
Companies and Markets
Companies & Markets
For any country its infrastructure plays a very important role in its development. A lot of foreign investment is also dependent on the quality of infrastructure that a country provides. In fact, infrastructure sector itself has a great potential to attract money if the asset quality looks good to the potential investor. Fiscal incentives do play a big role in enhancing the return on these assets, thus attracting more capital.
Budget for the power sector should focus on the following:
Disruption prevailed in the Indian economy in 2017 with the implementation of demonetisation in the latter part of 2016 and the introduction of goods and services tax. As per the estimate put forth by the International Monetary Fund (IMF) in its January 2018 update, India’s growth is expected to slow to a 4-year low of 6.7 per cent in FY2018 in the backdrop of the introduction of the pan-India GST regime.
A day ahead of Union budget, agri input stocks rose sharply on Wednesday in anticipation of large scale budget incentives for fertiliser, seed, farm equipment and agro-chemicals sectors.
The rise in share price of agri input stocks was in contrast to the fall in benchmarks Sensex (0.19 per cent) and Nifty (0.20 per cent) and the broader market indices BSE small cap (0.83 per cent) and BSE mid-cap (1.29 per cent).
Even as benchmark indices, BSE Sense and NSE Nifty, have set record high levels for themselves, selling has emerged in the mid and small cap segments.
According to analysts, what has triggered a selloff in smaller counters is the fear that the budget will tinker with the long-term capital gains. The BSE small-cap and mid cap indices have underperformed the benchmark indices and have given negative returns.
An analysis of the broad BSE 500 index shows that more than half of the stocks have given negative returns.
There are many expectations from this budget since we haven't seen any populist budget till now from present government, which has been focused on fiscal consolidation since the beginning of its term. There have been banking reforms like Jan-Dhan Yojna, PMAY and Mudra, while on the other hand, we also saw a tax overhaul with GST and, of course, demonetisation. The unearthing of projects like Bharat Mala was a massive step. Falling crude prices, falling global and domestic inflation, stable gold prices had led to huge inflow.
The Union Budget 2018-19 is likely to set the market direction in the coming months, especially given the mouth-watering returns to the investors in last 12 months. Corporate earnings announced so far have been more or less in line with expectations. However, after giving satisfactory returns, the further direction of the equity market will depend on the actual budget announcements and, therefore, the budget is important for investors.
The Internet and Mobile Association of India (IAMAI) has highlighted key tax related challenges that the digital sector expects to be addressed in the budget.
The equity market has run up quite sharply ahead of the NDA government’s last full budget on expectation that the government will take measures that would spur growth in the economy.
According to analysts, two key things stock market investors are looking forward to in Budget 2018-19 are continued commitment to fiscal consolidation and no additional tax burden on capital market investments.
Indian IT seems to have turned the corner during the third quarter, which ended in December. Digital deal sizes are growing and the overall momentum for the space is starting to pick up.
In addition, digital services portfolios are growing in double digits for most local tech vendors and this growth will sustain for at least three to four years, predict analysts.