7th Central Pay Commission: How 2016 is different vs 2008 for macros and markets
BT Online February 5, 2016
Global financial services major UBS in a report said investors are complacent about any potential change in India's policy framework, especially in the backdrop of 7th Central Pay Commission. The brokerage expects CPC to negatively impact government's fiscal consolidation path and sees states to face bigger impact.
"Impact of CPC on Central government's fiscal is likely 0.4 per cent of GDP, which many investors viewed as not a big deal. The impact is however much bigger on states (over 1.1 per cent of GDP)," said UBS in a report.
UBS added that its baseline scenario is of a staggered, delayed or diluted implementation of CPC, but also said that any delay or dilution to CPC would be a negative surprise for specific sectors and stocks.
The report further noted that consumption boost is not guaranteed even with CPC, neither is it surely sustainable beyond 2-3 quarters.
The global brokerage sees year-end Nifty target in 2016 at 8,200 level, which offers better risk-reward post recent correction. Its downside scenario implies end-2016 Nifty of 7,000.