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The Union Budget 2012 has been a tightrope walk between triggering a roadmap for fiscal consolidation and managing development & popular sentiment. The increase in Service Tax and excise duty were anticipated, and has resulted in some fiscal respite. The introduction of the Rajiv Gandhi Savings scheme is good for the equity market, by way of increased long-term investor participation. In addition, reduction in STT on delivery has added to the investors' return potential for equity.
In future, the Budget will have to be followed by a decrease in subsidy, in tune with the Budget estimates. The market will require the Government to take the fiscal consolidation roadmap ahead with possible increase in oil / petrol prices, which will be crucial to providing RBI headroom for a significant rate action. Until then, it is up to the Government.
— NIMESH SHAH, MD & CEO, ICICI PRUDENTIAL AMC
Overall, the budget is anti-inflation in nature and seems to be more realistic. The future direction for both the equity and the debt market would be driven by both the domestic factors indicated by corporate performance — Government finances and global factors affecting liquidity.
From the equity market's point of view, there are two immediate good outcomes in the budget. Since less than 10 per cent of the transactions in the equity markets are for delivery, the 20 per cent drop in STT should help inculcate more long-term investing behaviour. While details of the new scheme — Rajiv Gandhi Equity Savings Scheme that would allow for income tax deduction of 50 per cent to new retail investors, who invest up to Rs 50,000 directly in equities, and whose annual income is below Rs 10 lakh — are yet to be seen, we hope the Equity Linked Savings Scheme (ELSS) provided by the Mutual Funds with a lock-in of 3 years gets this benefit.
— SANDESH KIRKIRE, CEO
KOTAK ASSET MANAGEMENT
Although we believe that the Budget has become more of a non-event, is largely a statement of accounts, and that larger policy decisions can be taken outside it, the UPA seems to have missed an opportunity to showcase its intention towards sustaining and improving the growth momentum by announcing some key investment and capital spending programmes for the next 5 years. A perceptible shift in government expenditure towards investment building from consumption spending would have re-kindled the capex cycle.
However, overall, this Budget puts us once again on a credible path of fiscal consolidation, and if followed by expenditure reforms in the coming years by rationalising subsidies and boosting investments, it would give a big boost towards achieving a higher non-inflation-based growth trajectory.
— ARVIND CHARI, FUND MANAGER (DEBT)
QUANTUM ASSET MANAGEMENT
The Union Budget seems realistic, credible, and is a sincere attempt towards achieving fiscal consolidation. It focuses on measures that will enable widening of the capital markets, facilitate corporates to access funds through External Commercial Borrowings and Infrastructure Bonds. There is a clear move towards propelling infrastructure development through reforms in sectors like roads, ports and power. We believe that the budget needs political consensus on big policy reforms for achieving the intended goal.
— GOPAL AGARWAL, CIO
MIRAE ASSET GLOBAL INVESTMENTS
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