Effect of Budget on Capital Market, should you change your investment strategy after Budget

1. The FY 2017-18 budgetmaintainapath of fiscal prudence andenvisageshigherinfrastructure
investment.The Modi government’s focusonrural and housingsectorandexpectedtobe positive
for multiplesector.Thiseventmaybe takenaspositive eventforcapital market.
Rural economyin focus:Aftera negative impactof demonetisationonthe rural and MSME specially
microand small enterprisessector,governmentincreasedtheirfocusonthese sectorbyallocating
Rs10,00,000Cr in farmcredit,reducingthe income tax rate for businesswithturnoverlessthan
Rs50Cr, as well asbyIncome tax holiday upto 7year for start-up.MSME andstart-upmay give a
betterreturnon Investmentasa result.
Consumptionand housingto remainin focus: Like budget2016-17 government`sfocusremain
stationaryinhousingandconsumptionsector.The rate of interesthave alreadyfallenandIbelieve
that there issome scope to furtherreduce the rate withlowerfiscal deficitandnetborrowings.The
rural focus,decrease inthe rate of income tax at entrylevel, andisexpectedtorevivethe
consumptiondemand. The newmeasuretakenbythe government foraffordablehousingsectorare
positive forreal estate,cement,Non-BankingFinance Company,andothersector.Thismaybe taken
as a good signfor the marketas demandhastakensevere hitinthese sectorafterdemonetisation.
Investormayinvestin housingsectorcompanieslike DemanHousing,IndiaBull HSGFIN,and
LICHSGFIN etc. Theymayopt for consumptionsectorcompanieslikeBajaj Elect.,Blue star,Havells,
ITC etc.
Capital expenditure getsa boost:The government`scapital expenditure exceedthe budgetestimate
for F.Y 2016-17 by 13%, whichindicatinghigherspendingbythe government.Furtherthe FMShri
ArunJaitleyannounced10.7%increase incapital expenditure forF.Y2017-18. Thiswill be spendon
infrastructure development(Road,MetroandRailway),whichleadtomultipliereffectoneconomy.
The government`salreadyslowdownthe spendingof revenue onsubsidiesandgrants,
government`smayfurtherreduce the subsidiesandgrant,whichindicate additional fundsforcapital
expenditure.Sorightto investinInfrastructure sectorwhichislikelytogrow inupcomingfinancial
year.Investormayinvestincompanylike L&T,PowerGrid, andKEI etc.
Budget focuseson fiscal prudence and reforms: The governmentremainoncourse toachieve the
F.Y 2016-17 fiscal deficittargetof 3.5%. The governmentwasunderpressure postdemonetisationto
take populistmeasure;howeverbyaimingforfurtherfiscal prudence,governmenthastakenthe
rightdecisionforthe economy. The F.Y2017-18 budgethasset an achievable targetof fiscal deficit
of 3.2%. The governmentestimate recoveryinthe demandfrom1st
firstfinancial quarter,whichhad
reduceddue todemonetisation,resultbringingthe economybacktogrowthpath.No change inlong
termcapital gains tax duringbudget2017, may sendstrongsignal tothe foreigninvestorsandrating
agenciesaboutthe credibilityof the governmentpolicies.Whichshow positiveimpacton
government`smake inIndiainitiative.