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Budget 2019: Sensex, Nifty likely to rise if govt presents a strong reform agenda for the next five years

Sitharaman will have to walk a tight rope between fiscal prudence and spending on social welfare. The budget will set the tone for the next five years and offer insights into its thinking and critical focus areas.

twitter-logo BusinessToday.In        Last Updated: July 3, 2019  | 16:43 IST
Budget 2019: Market would rise if govt presents a strong reform agenda for the next five years
Finance Minister Nirmala Sitharaman

Finance Minister Nirmala Sitharaman will present her maiden Union Budget on July 5 this year. Sitharaman will have to walk a tight rope between fiscal prudence and spending on social welfare. The budget will set the tone for the next five years and offer insights into its thinking and critical focus areas. BusinessToday.In spoke to experts on their expectations from Union Budget 2019. Here's what they had to say.

Jyoti Roy, Equity Strategist (DVP) at Angel Broking said, "Given the severity of the crisis we feel that expansionary fiscal and monetary policy is the need of the hour to revive the economy before the slowdown becomes deep rooted and well entrenched. While the RBI has been doing its part by cutting interest rates, markets are expecting the government to provide some sort of a fiscal stimulus to the economy in the budget.

A 20 bps increase in fiscal deficit will not worry the markets much and some amount of fiscal slippage has already been factored in by the bond markets with the 10 year G-Sec trading at 110bps above the repo rate as compared to normal spread of 75 bps."

Arun Singh, Chief  Economist at Dun and Bradstreet said, "Long-Term Capital Gain (LTCG), Securities Transaction Tax (STT) and Dividend Distribution Tax (DDT) result in triple taxation of corporate earnings, leading companies to favour debt capital over equity.

Given the high NPA levels, the government is likely to announce measures to rationalise these taxes. Given the moderating investment demand and stress in the NBFC sector, following announcements for the BFSI sector are expected in the upcoming Union Budget.

As credit supply of PSBs is affected due to provisioning for Non-Performing Assets (NPAs), the government is likely to propose recapitalization of Public Sector Banks (PSBs)

The budget may outline a plan for selling stakes in some PSBs and/or further consolidation in the PSB segment."

Motilal Oswal, Chairman & Managing Director, Motilal Oswal Financial Services said, "The biggest expectation from the new Finance Minister is to revive growth and bring the economy back on track. There has been an increasing pressure on the government to increase spending and to defer the fiscal deficit targets. However, going by the past track record of the NDA government, we expect the fiscal prudence to be maintained.

The government needs to ensure that private investments also picks up as that would be a key driver for long term economic growth. Some of the other key factors to look out for in the budget would be the investment plans for job creation, increasing tax compliance, simplification of GST, attracting foreign investments, divestment plans, recapitalization of banks, etc.

The market would cheer if the budget is able to deliver on these expectations and presents a strong reform agenda for the next five years."

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