Moneycontrol
Last Updated : Feb 03, 2019 09:56 AM IST | Source: Moneycontrol.com

Thanks to sops worth Rs 1 lakh crore, RBI unlikely to cut rates in near-term

The fiscal stimulus of close to 0.4 percent of the GDP is inflationary in nature and put pressure on the bond yields. This could adversely impact whole funded NBFCs and other financial services companies, Gaurav Dua suggests.

Kshitij Anand @kshanand

The fiscal stimulus of close to 0.4 percent of the Gross Domestic Product (GDP) is inflationary in nature and puts pressure on the bond yields.

This could adversely impact whole funded non-bank financial companies (NBFCs) and other financial services companies, Gaurav Dua, Head of Research, Sharekhan by BNP Paribas, said in an interview with Moneycontrol’s Kshitij Anand.

Q) Your first reaction on the Interim Budget?

A) In the run-up to the elections, the Interim Budget does propose sops for small and marginal farmers, middle-class taxpayers, workers and small businesses.

Despite the fiscal stimulus of close to Rs 1 lakh crore (works to 35-40 bps of GDP), the fiscal deficit slippage is projected to be limited at 3.4 percent of the GDP.

Though the fiscal math depends upon aggressive assumptions related to buoyancy in tax revenue receipts (18 percent growth penciled in indirect tax revenues), it is fairly well-balanced budget given the political compulsions and macro situation.

Q) Do you give a Thumbs up or Thumbs down? Also, your rating from 1-5 (5 being the best) for the Interim Budget.

A) Thumbs up. Rating of 4 out of 5.

Q) Top stocks which emerged as winners on the Budget day and why

A) The biggest beneficiaries of close to Rs 1 lakh crore sops and benefits proposed in the Interim Budget would be consumer staples companies especially rural-focused players in foods and beverages (milk, biscuits, snacks) and personal care (soaps, creams, etc).

The tax sops proposed for the real estate sector is expected to provide incremental demand for building material companies like cement, tiles, sanitary ware, plywood, among others.

Q) Top stocks which emerged as losers or which are likely to get negatively impacted by Budget proposals and why?

A) The fiscal stimulus of close to 0.4 percent of the GDP is inflationary in nature and put pressure on the bond yields. This could adversely impact whole funded NBFCs and other financial services companies.

Also, this could prompt the Reserve Bank of India (RBI) to not rush ahead with rate cuts in the near-term and rather maintain a pause on the interest rates.

Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on Feb 3, 2019 09:47 am
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