Fiscal deficit, legislative reforms to drive market- UTI MF

Fiscal deficit and legislative approvals to the recent reform measures announced by the government will be the key factors to drive the future movement of the market, a top official of UTI Mutual Fund said here today. "The future movement of the market will depend on how the government contains the fiscal deficit. Also, legislative approvals to the reform measures announced by the government over the past two months will be critical for direction," UTI Mutual Fund Executive Vice-President and Fund Manager Swati Kulkarni told PTI.

Kulkarni manages one of the oldest equity diversified Schemes, the UTI Mastershare Unit Scheme, which has a sound record of giving dividends to its unitholders. Late last month, the Finance Ministry had said fiscal deficit may overshoot to 5.3 per cent of the GDP from the Budget target of 5.1 per cent this fiscal. On inflation numbers for October and weak IIP data for September, Kulkarni said the market has already factored in weak industrial output data and higher inflation numbers.

While retail inflation stood at 9.75 per cent for October, industrial production contracted by 0.4 per cent in September driven down by a dismal show by the manufacturing sector and decline in consumer as well as capital goods output. Kulkarni also said weak revenue growth due to subdued corporate profits along with subsidy burden are the other two critical factors, from which market would take cue in the future.

Talking about global factors affecting the domestic economy, Kulkarni said sliding exports are the direct fallout of the slowing global economy. For the first seven months (April-October) of the current fiscal, exports have shrunk by 6.18 per cent to USD 166.92 billion compared to same period last fiscal. Talking about US and European economies, she said, "though some growth is visible in the US economy and the re-election of Barack Obama is not likely to throw any negative surprises on the policy front, the European risks still persists."

Kulkarni, however, added falling demand from China is likely to support margin expansion of domestic corporates due to falling commodity prices.