After discounting the Budget fairly, FIIs now bet big on Govt action

For foreign institutional investors the Union Budget was a not major event, as they had already discounted it and kept their expectation low. Most of them rather bet on the Government and its policy initiatives with reform agenda and fundamentals for the equity markets to sustain higher levels.

Credit Suisse said the high expectations from the Budget were unwarranted. “As expected, most revenue and expenditure line items stayed unchanged from the interim February Budget; only PSU dividends, non-tax receipts and disinvestments increased.”

Nomura, which set a year-end target of 27,200 for the Sensex, said the Budget is only a pointer to the Centre’s broad governance philosophy, with actual execution to happen outside the Budget. “We remain constructive on the market and believe that the Budget actually strengthens our case for being bullish on financials and infrastructure plays.”

According to Macquarie, the Indian economy is well on track to go back to 7 per cent plus growth rate by FY17. “The Government is focussed on kick starting the investment cycle and building infrastructure, so we believe it is prudent to remain overweight on domestic cyclical sectors such as banks, industrials and materials. With the Budget out of the way, markets can focus on fundamentals.”

Citi believes a slowly upping economic cycle, market and capital risk appetite, and a “Budget that meets (not beats)” high market expectations is moderately market supportive. “It (Budget) does though shift the market’s next leg to real economic activity/earnings or policy (beyond the Budget). Citi remains positive on the market with a 26,300 (Sensex) December target.

For Morgan Stanley, the investment push in the Budget both directly via Government spending as well as tax cuts, together with higher FDI limits in insurance and defence and a bunch of steps to ease taxation should augur well for the progression of the share of profits in GDP.

“We are raising our June 2015 Sensex target by 9 per cent to 28,800 based on Sensex earnings growth,” it said and added that its portfolio strategy remains geared towards cyclicals and stocks with GARP characteristics.

For Morgan Stanley, the key risks for Indian equities are global monetary policy shifts, policy momentum at home, a rise in oil prices, bunching of equity supply and the rich valuations that equities trade at.

Bank of America-Merrill Lynch had seen only a limited market impact of the Budget. “Overall, we continue to remain bullish on the markets and maintain our index target of 27,000 by the year-end though in the near-term we could see some consolidation due to the monsoons. We recommend buying at every dip,” it added.

COMMENT NOW