Equity and Debt: What to Expect from Union Budget 2018-19

Two weeks from now, the Finance Minister Mr. Arun Jaitley will present the Union Budget 2018-19. PM Modi has hinted that this time may not be a populist budget. Nevertheless at Quantum we are known for urging our investors to ignore the budget as we believe that an annual summary of the Union Government's accounts and the projections for the next year should not affect your long term financial goals. However, having said that, you would still be keen to know if we have any expectations from the Finance Minister. Our Fund Managers Mr. Nilesh Shetty and Mr. Pankaj Pathak share their budget expectation for Equity and Debt respectively.

Budget Expectations by Mr. Nilesh Shetty, Associate Fund Manager-Equity Funds

• Focus on Farm income and lowering corporate taxes
The finance minister had set a roadmap of doubling farm income by 2022 and lowering corporate taxes in his initial budget, one expects him to announce measures to try and move further along the stated objectives that he has laid out.

• Increased thrust on Infra and Rural India
Private participation in large infra projects continues to remain limited. Government remains the key driver of infrastructure creation and one expects the trend to continue in this budget as well. Rural India continues to remain in distress and one expects measures to address discontent and revive sentiments.

• Measures to shore up revenue base
With GST Revenues falling short of expectations one expects government to look at alternative ways to boost revenues. Imposition of Long Term Capital Gains tax on Equities will be perceived negatively by equity markets.

• Risk of a populist tilt
With this budget being the last one before national elections there is a risk the government adopts a populist tilt despite the massive from the PM. Given the limited fiscal space and major deterioration in the fiscal deficit may be perceived negatively

Budget Expectations by Mr. Pankaj Pathak, Fund Manager - Fixed Income

• Managing the Fiscal Deficit
By raising the market borrowing in current fiscal, government has made a very clear statement that expenditure cut is not an option. And it seems even more unlikely in next year when rural distress is taking centre stage ahead of general elections in 2019. So the burden of managing the fiscal math in FY19 will shift to revenue side.

• Uncertainty on indirect taxes
Direct tax collections are showing encouraging trend and will likely to remain buoyant with rising tax payers' base. But the uncertainty on indirect taxes will continue in FY19 as the GST system evolves.

• 3% fiscal gap likely
Our base case is that government will target fiscal deficit of 3.3% to GDP in FY19. However we cannot rule out the possibility of 3% fiscal gap projection with significantly higher disinvestment target.

• Government to be mindful of challenges
Although the economy is showing early signs of revival, the government will have to be mindful of the challenges emerging from rising crude oil prices and turning inflation trajectory. Government's fiscal plans can significantly alter the RBI's stance over inflation and policy rates. Hence, it will be essential for the government to strike a balance between the fiscal discipline and supporting rural economy.

We hope as assured by the PM, that the budget comes with a host of positive measures. Moreover what is in for the nation in that leather suitcase is something only time will tell. But as far as your investments are concerned, all you have to do is manage your personal budget meticulously and continue to focus on your financial goals.

Disclaimer, Statutory Details & Risk Factors:

The views expressed here in this article / video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. Please visit – www.quantumamc.com/disclaimer to read scheme specific risk factors.

Above article is authored by Quantum.

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