Budget Reactions: Hope RBI boost for govt plan on realty, capex: Dolat Cap

Dolat Capital has come out with its report on Union Budget 2013-14.

• The Budget 2013 could be summed up as an exercise which did not do much to elevate sentiments, yet did not do anything to damage them either. Given the market’s feelings and fascination for the current Finance Minister, there were always expectations from him to deliver magical solutions. He certainly did not achieve that in our opinion, however given the circumstances, we believe it was a creditable performance.
• The key positives from the proposals include boost to low cost housing, boost to corporates to execute capex plans and public private partnership in the coal segment .
• We expect the RBI to follow through with a supportive stance, and initiate another reduction in rates by 25 bps by April. The key caveat for the near term remains the trajectory of inflation.

Fiscal Overview:

• Budget projects a real GDP growth of 6.7 percent and nominal GDP growth of 13.4 percent. This implies an average inflation of 6.7 percent for FY14.
• Fiscal deficit target in line at 4.8 percent. The key to achieving this target shall be the assumption of tax collections growing at 19 percent. We do not see a repeat of cut in expenditure given its an election year. Hence tax collections shall be critical this year
• Assumption of divestment receipt (INR 400 bn) and spectrum sale (INR 400 bn) appear aggressive, and could make the decisive swing.
• Oil subsidies projected at INR 650 bn, will depend how far the diesel prices are raised. If these hikes go on all the way through even till Q1FY14, it will make a positive impact on the sentiments

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