INSUBCONTINENT EXCLUSIVE:
By S NarenThe interim budget 2019 is a pro-rural, housing and middle-class centric one
The fiscal outlays were increased to promote a slew of schemes related to agriculture, defence, electricity, animal husbandry, and more
Yet, the finance minister managed a fine balancing act between fiscal discipline and developmental needs of the economy.
On the fiscal
front, the government has adhered to fiscal prudence
Fiscal deficit for FY19 (current financial year) at 3.4 per cent of the GDP is a minor slippage of 10 bps over the budgeted estimates
The current account deficit for FY19 remains contained at 2.5 per cent.
As for the socio-economic agenda, the budget focused majorly towards
addressing the agrarian crisis in the country.
Among other things, the budget also announced several measures for middle-class taxpayers
The key highlight was the tax exemption of income up to Rs 5 lakh per annum
This will boost the disposable income and purchasing power in the hands of a taxpayer, in turn increasing low-ticket consumption.
Another
notable positive is the government’s initiative to aid the sagging real estate sector
The budget has proposed to provide the benefit of rolling over capital gains for the investment made in two residential properties (earlier,
the benefit was limited to one property)
A notional rent earlier applicable to the second house has been waived off, considering the situational needs of citizens like migration for
job opportunities or family reasons
Key tax breaks for construction of affordable homes and other incremental measures indicate that the government is looking at real estate as
an essential driver to augment the economy.
In all, a series of impactful tax breaks for income taxpayers coupled with farmer benefits
should be positive for consumption and auto
Further, infrastructure, banking and sectors deriving benefits from rural growth stand to benefit.
Equity markets could remain volatile and
the upcoming general election (in April/May) remains the key trigger for the rest of the year
We believe it is conducive for investors to accumulate equities in a staggered manner through SIP/STP.
For lump sum investments, we
recommend large-cap-oriented schemes and/or asset allocation through hybrid category like balanced advantage funds
As for themes, we are positive on special situations and those benefiting from volatility
Themes such as banking and infrastructure could also be explored in 2019, post the recent oil price correction.
As for debt, investors could
look at dynamic duration schemes and low-duration funds, which tend to mitigate interest rate volatility (investing in instruments with
maturities of one to three years) along with accrual schemes, which can capture the current elevated yields.
The author is Chief Investment
Officer, ICICI Prudential Mutual Fund.
