Mutual funds didn’t get any direct sops in the Budget 2023. However, mutual fund managers say that the growth projection, fiscal deficit number and lower than expected market borrowing are all positives for both equity and bond markets. Here’s what India’s top mutual fund managers said about the Budget 2023.
Mahesh Patil, CIO, Aditya Birla Sun Life Mutual Fund:
The Union Budget has a dual focus on growth and fiscal consolidation. The fiscal calculation is based on a nominal GDP growth projection of 10.5% which is credible. At the same time, the fiscal deficit target at 5.9% is largely in line with our estimates while the borrowing amount is slightly below our expectations. The proposed capital expenditure at Rs 10 lakh crore is at a record high. In addition, there were no negative surprises on the capital gains front. In fact, there was some relief for taxpayers which should support consumption. Overall, the budget is aimed at pro-investment and consumption.
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Chirag Mehta, CIO, Quantum Mutual Fund:
As expected, the budget is heavy on Capex (at 10 lakh crore, an increase of 37% from FY23 revised estimates) which is needed to ensure the cyclical recovery continues. Infra (railways 2.4 lakh crore, 50 new airports and clean energy 35,000 crores) along with the Agri push will help the rural economy improve by boosting employment and incomes. Allocation to affordable housing of 79,000 crores, increase of 66%, will also help the housing market retain momentum. Incentives for local production in form of lower duties will also be helpful. Overall, this budget push on capex will ensure that the private capex greenshoots really sustain, help inclusive growth and make the economy become more resilient in light of the global slowdown.
Both Equity and Bond markets have reacted positively to the budget, as the thrust to maintain the cyclical recovery and largely maintain fiscal prudence has helped lift sentiments.
Dhawal Dalal, CIO – Fixed Income, Edelweiss MF:
Building on the theme of “continuation, consolidation and credibility”, the finance minister delivered her 5th Union Budget today with clear focus on capex-led growth while maintaining fiscal prudence.
A 33-percent jump in capex to Rs. 10 trillion in FY24 will create a multiplier effect on economic activities and support additional jobs. Higher allocation for Indian Railways will continue modernization of the key infrastructure and heavy industries. Extension of 50-year interest-free loan to States by one more year while linking it to capex will support infrastructure development.
Market participants rejoiced at the conservative estimates in the Union Budget with no fine print or hidden negatives. There was something positive for every strata of the society. Broadening of personal tax slabs and nudge for the New Tax Regime is aimed at higher savings which may support personal consumption.
FY24 nominal GDP is assumed to grow at 10.5%, which is quite credible. Increase in FY24 net tax receipts at 11.5% suggests modest tax buoyancy. Fiscal deficit is expected to contract by 50 bp to 5.9% of GDP with aim to bring it below 4.5% of GDP by FY26.
Bond and equity markets rebounded sharply after the announcement. For bond market, FY24 net borrowing of Rs. 11.8 trillion and gross borrowing of Rs. 15.4 trillion was on the lower side of market estimates. This should keep benchmark bond yields from rising, in our view. We expect benchmark 10Y sovereign bond yield to trade between 7.25% and 7.5% in the near-term.
Sandeep Bagla- CEO, TRUST AMC:
From a bond market perspective, the borrowing numbers are in line with expectations. With the US yields down so much from their peak, Indian yields were looking for an opportunity to go down as well. The Budget is a non negative event, and has triggered a minor rally today. The investment demand from insurance companies, provident funds is likely to remain strong on back of increasing corpus and FPIs could turn buyers as the real interest rates have turned significantly positive as well. If inflation remains under control and there is no incremental hawkishness shown by the central bankers, it is quite possible that Indian bonds could rally by 50-60 basis points this calendar year
Another positive aspect of the budget was to deal a body blow to so-called Market Linked Debentures (MLDs), which had degenerated to instruments of blatant tax evasion, by taxing the capital gains generated at the rate of Short Term capital gains.
Umesh Kumar Mehta, CIO, SAMCO MF:
The budget when dissected in three realms of Agriculture, Manufacturing and Services sector, it can be seen that it has done maximum for Agriculture and least for Services sector and specially for financial sector; as the budget's inclination towards New Income Tax regime will reduce incentive to invest in financial products (including MFs’ ELSS, insurance premium etc) or for that matter even the decade old housing sector incentives for interest payments will be the least preferred option. This budget therefore has rewritten the rules for financialization of savings in India which will induce expenditures rather than incentivize savings. However the fiscal deficit under control, no big disinvestment targets, no bigger borrowings and thrust on govt capex will keep the bulls happy on the stock markets.
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