Global uncertainties will dictate markets more than Budget 2016, said Amisha Vora, Joint Managing Director, Prabhudas Lilladher Group. In an interview to Aprajita Sharma, Vora added along with Budget cues, next RBI rate cut will also depend on how US Federal Reserve (Fed) moves on US interest rates. Edited excerpts:
1) What are your top five expectations from Finance Minister Arun Jaitley's Budget 2016 for short to medium term?
Amisha Vora: Finance Minister Arun Jaitley got sufficient time to assess the health of the economy in order to look for viable solutions for the key problems embedded in the system. In this backdrop, we expect Budget 2016 to be more pragmatic in channelising the government resources for infrastructure development and in turn creating multiplier impact for the economy.
In the last Budget, FM had promised some tax reforms. We expect to see them taking shape in this Budget. We also expect proper allocation of infrastructure funds so that much needed equity for infra projects can be made available.
One of the key requirements for a thriving economy is capital expenditure (capex). As private capex is drying, we expect public expenditure to be speeded up. To achieve that, if divestment is not possible, we expect government to take bold steps of strategic sales also.
How they plan to capitalise public sector banks will also be a key thing to watch out for.
2) Will slippage in fiscal deficit be market positive or negative?
Amisha Vora: We believe fiscal consolidation path should not be altered. Therefore, government should not go overboard on its efforts to revive capex in the economy.
As government has already taken decisions on wage revision and food subsidies, which are inflationary in nature, and will contribute to fiscal deficit, any major slippage in fiscal roadmap on account of fresh subsidies or otherwise will be viewed negatively by the markets.
3) How will industry react if indeed Budget 2016 turns out to be a pro-poor budget?
Amisha Vora: Since this government has put in most sincere to reduce leakages in subsidy distribution as also rationalise the spend, markets have taken comfort on subsidies not ballooning. But introduction of fresh subsidies in the Budget will be treated negatively.
4) Where do you see Sensex and Nifty headed from here post Budget 2016?
Amisha Vora: Budget will not be a major event affecting Sensex, Nifty levels. Markets will be more dictated by the global risk uncertainties as we see little reason why the risk-off in the global markets and also the reverse-flow from emerging markets will change in a hurry. We believe markets will move in the plus/minus range of 5 per cent post Budget.
5) Top five sectors to invest in the run up to Budget 2016, and why?
Amisha Vora: On policy level and otherwise, this budget will focus on agriculture sector. The continuous focus on road, infrastructure and railways will continue. Defence is another sector investors should look at and domestic consumption stocks are good bets if Goods and Services Tax (GST) sees the light of the day in the Budget session.
Recent RBI policy review remained a non-event. Do you expect an out-of-policy rate cut post Budget 2016?
Amisha Vora: If government continues with its strong resolve to maintain fiscal discipline, Raghuram Rajan will have little freedom to reduce interest rates but actual action will also depend on next move by the US Federal Reserve. Interest rates would not merely depend on fiscal deficit, if Fed hikes interest rates, Rajan will not be left with more choices but to cut rates.