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Mar 17, 2012, 03.56 PM IST | Source: Moneycontrol.com

Budget News: Union Budget 2012-13 progressive but not aggressive, Unicon

Unicon Investment has come out with its report on Indian Union Budget 2012-13. As per the research firm banks, NBFCs & Financial institutions are expected to post healthy growth on the back of higher fund allocation.

Unicon Investment has come out with its report on Indian Union Budget 2012-13. As per the research firm banks, NBFCs & Financial institutions are expected to post healthy growth on the back of higher fund allocation.

The Finance Minister in the backdrop of global uncertainties and domestic constraints both economic and political presented a pragmatic budget, preserving the growth momentum of the economy (est. at 7.6% for FY13) by containing the high fiscal deficit to 5.1% in FY13. The budget seems to be more realistic and achievable and endeavors to focus on crucial sectors like agriculture, infrastructure and power to strengthen and revive the economy to achieve sustainable medium term growth. This would be implemented through.

• Addressing supply side bottlenecks in agriculture, transportation & infrastructure.

• Measures taken to provide low cost funds to some stressed infrastructure sectors like power, airlines, roads & bridges, ports & shipyards, affordable  housing, fertilizers & dams.

• Increasing the tax/GDP ratio through increase in indirect taxes, service tax and broadening of service tax net.

• Reducing cap on subsidies to 2% of GDP

• Higher outlays on agriculture, health, education and employment generation would have multiplier effect.

This budget is also perceived as populist budget, with enhancement of exemption limit to provide some comfort to aam aadmi from high inflation. Also, the introduction of Rajiv Gandhi Equity Savings Scheme & reduction of STT tax to be positive for the retail investors. This would result in higher disposable income which leads to higher consumption.

The markets closed negatively as profit booking continued and the budget did not have anything substantial to offset it Most of the positive announcements were on expected lines and had negligible impact on the market. However, going forward we expect the market to stay range bound between 5100 and 5500 for few weeks and follow global cues. The domestic events like interest rate cut, last quarter results of FY12 and announcement of reforms in the first quarter of FY13 may give a new direction to the market. The Nifty then may move ahead towards the 6000 mark in the second half of this year.

Union Budget 2012-13 was positive for the banking and financial sector in terms of policy announcement. The focus of the budget was agriculture & infrastructure sector this would lead to increase loan growth & fee income for banks. Also, captalisation of PSU banks will be positive, but large government borrowings may put pressure on the interest rates going forward. We expect banks, NBFCs & Financial institutions to post healthy growth on the back of higher fund allocation.

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To read the full report click here

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