Union Budget 2017-2018 Review: Nirmal Bang

Finance Minister has presented half budget for FY17-18 which will be followed by major changes in Indirect Tax law with GST getting implemented from 1^st July 2017. Hence, FM has tweaked indirect tax marginally. Though the broader frame work and rates for GST are more or less agreed between the state and Central but final law with specific rates for different goods is still to be finalized. That will have major impact on various corporates thus we feel that another half budget will be coming soon.

In this Budget FM has continued its trend of following financial prudence with Fiscal Deficit of 3.2% and Revenue Deficit at 1.9% vs Revised Budget Estimate for FY16-17 of 3.5% and 2.1% respectively.

Lower fiscal deficit has led to lower net government borrowing estimate at Rs.3.50 lakh cr vs FY16-7BE of Rs.4.41 lakh cr and FY16RE of Rs. 3.65 lakh cr. This is likely to leave enough liquidity in the system and will keep interest rates low.

Government in this budget has focused more on rural economy and announces various measures to improve growth over there.

Apart from this the other focus area in this budget is low cost housing.

One of the fears in market was of increasing tax contribution from Equity Market with imposition of Long Term Capital Gain which has not come and the same has acted as positive sentiment for markets. Apart from this, no major changes and fiscal prudence has also worked in favour of market. But going ahead, we have lot of uncertainty in near term. Be it State elections outcome, GST rate finalization or GST implementation on domestic front.We had seen that Indian equity market has outperformed in January Month with reduction of impact of demonetization and in line with outperformance seen in various equity markets across the world. However, current valuations has already reached to upper end thus leave limited scope for re-rating. Only earning growth can drive the market from here and we feel earning growth is likely to remain subdued in near term. We feel market is likely to remain range bound in near term. One need to follow stock specific approach to outperform in this market.Disclaimer: The views and investment recommendations expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.