While most market analysts are of the view that the February 1 Budget will be a non-event and the main Budget will be announced post elections, Nandik Mallik, CIO, Avendus Capital Alternate Strategies, has a unique perspective - that the government would treat this as a regular Budget. Mallik also shared his views on expectations from taxation and capex in the upcoming Budget. Edited excerpts:
What are your expectations from the Budget?
My strong view is this will be more than an interim Budget. There is no rule which says that you can't disclose now what you want to disclose in June.. If the market is anticipating 30 percent now and 70 percent afterwards, I think at least 50-50 percent, if not 60-40 percent, in terms of what they will disclose in this Budget. This time around they have the mandate. In previous instances, like 2019, the then governments didn't have the mandate. So, comparing present governments with what governments did in the past could be a bit unfair. This time, I think, the Budget in terms of fiscal also will have less populism. So many people think that June will be the main Budget. I have a reverse view that this will be the main one and what will happen in June will be a non-event.
Are we setting ourselves up for a big rally today?
I don’t think the market is too focused on populism. I think it is focused more on taxation and whether they will change that. I personally feel it will not matter. I think even if they increase the short term (taxation) from 10-15 percent, there may be a very short-term reaction to it but in the long term it won't matter. I think the long-term push of the government is to ensure less taxation leakage. Even if they announce an increase in short term (taxation) and reduce income tax by 2-3 percent for the highest bracket, I think that kind of balances each other out sentiment-wise. There might be a short blip.
Is there anything else that you think will be the focus?
No, I think the main thing will be taxation, and it will happen, if not now then in June. I think 60 percent of the Budget will be front-loaded. They will not leave much for the second Budget. There's no rule which says that you can't say what you want to say on the floor of the house. At worst, what you said can be reversed by the next government.
What will the market be disappointed about with regards to capex spending and what will it be surprised about?
I don't think there will be any significant deviations from what the expectations are. With regards to capex spending, previously what used to happen was a lot of it would be hidden in the fine print. But they have the mandate, they don't actually have to do it.
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