iStockNirmala Sitharaman’s second budget has been a mixed bag for mutual fund managers. Here’s how the equity fund managers react on the budget 2020:
Nilesh Shetty, Associate Fund Manager – Equity, Quantum AMC
The budget has lost a lot of its relevance. But in this case the people were looking at signalling from the government in terms of some of the key problem areas what can the government do be it slowdown in consumption, be it problem in the credit market of below investment grade.
But essentially the government has not done much in these pockets. So there is a big disappointment and the income tax changes have essentially made it more complicated where now they have introduced multiple slabs and created options for people to move across different tax regimes which complicates matters instead of simplifying it. Also, we have to wait for fine print to know which exemption have been removed.
Jinesh Gopani, head- equities, Axis AMC
It was a neutral budget. From a budget perspective, I don’t think it’s very negative or positive. The markets are down because there were a lot of expectations from the budget.
The knee jerk reaction is cold due to the LTCG tax that the market was expecting to go has not happened.
There are some good things in the budget like sovereign wealth funds given absolute tax benefit for five years if they invest in infrastructure related projects so that is a clear direction of bringing FDI into India. This is a big move.
Personal income tax also they have tinkered around giving benefit to the salaried people in the lower income tax bracket. Once the confusion resolves, things will be clearer.
The focus has come back to the basics of buying only good quality companies who are delivering good earnings growth. Ultimately, the markets are slave to earnings growth so, as and when the earnings growth revive, market will give them benefit of doubt and those stocks or companies will do well.
Swarup Mohanty, Chief Executive Officer at Mirae Asset Global Investments
The government has been emphasizing on financial savings. The removal of exemptions have come early and could slow down the process.
Taher Badshah, CIO, Equity- Invesco Mutual Fund
Through Union Budget 2020, the Finance Minister tried to provide a long term growth outlook for the India economy even as it probably missed satisfying market’s near term expectations to accelerate growth. Initiatives such as personal tax rationalization and abolishment of dividend tax are positive but the quantum of overall savings for the working class and investors is still not fully clear.
We think the restated math with regards to fiscal deficit for FY20/21 and deviation from the FRBM (Fiscal responsibility and Budget management Act) path was on expected lines.
Govt’s targets on disinvestment however appear considerably aggressive.
Overall, our base view of a slow and modest economic recovery in 2020 v/s the last two years remains on the back of an improving global macro, better domestic liquidity and recovery in rural demand.
Srinivas Rao Ravuri, CIO - Equities, PGIM India MF
First takeaway is that we should lower importance given to budget. Over a period of time, we have to look at budget as a routine exercise aimed at tweaking few things on yearly revenues and expenditure of the Government of India for the year. Unfortunately, expectations were elevated especially on stimulus to revive/kickstart the economy. One should remember that if something needs to be done for the economy, it can happen outside budget also as we have seen in September 2019, when historical corporate tax rate cut was announced.
Key positives are a) tax exemptions given to sovereign funds to invest in India b) extending concessional corporate tax of 15% to power sector also c) removal of Dividend Distribution Tax. Key disappointments was on slippage of fiscal deficit - though slippage was in-line with expectations but absence of any concrete measures to accelerate spend on core sectors like infrastructure is a concern.
Rajat Jain, CIO, Principal Mutual Fund
Given the slowing economy, the finance minister has tried to stimulate consumption by reducing tax rates esp. to the persons in the lower tax bracket. The continued focus on rural areas and infrastructure is welcome. The government has been reasonable in forecasting the nominal GDP and the growth in tax rates.
Sailesh Raj Bhan Deputy CIO - Equity Investments, Nippon India Mutual Fund
“Govt has taken a bold step to move ahead with higher spends, simplification of tax regime and fuelling infrastructure developments despite fiscal constraints. A tall divestment target will be keenly monitored but signifies a big intent towards fiscal prudence."
Vetri Subramaniam, Group President & Head-Equity, UTI AMC
The slowdown in India has been evident since the end of 2018. The government has taken several measures to address this slowdown in recent months. Monetary policy has also turned accommodative and over time we expect growth to respond. For India growth is as much an element of macro-economic stability as is the fiscal deficit, current account deficit or inflation. In this context the budget as a policy tool provided an opportunity to deliver a counter cyclical fiscal impulse. This strategy is not without risk given the size of the government’s borrowing program and our historically weak track record of fiscal consolidation. The government has made the decision in today’s budget to stay on the path of fiscal consolidation. This choice, while prudent, raises downside risks to growth. On the positive side the government’s fiscal resolve creates headroom for the monetary authorities to remain supportive of growth.
Nilesh Shah, MD & CEO, Kotak Mahindra AMC
“The budget is good on intent. However, the key is efficient execution in a time-bound manner. There are many positives to simplify things and encourage entrepreneurs but again, key will be execution in a time-bound manner. Intent needs to be converted into implementation."
Some mutual fund managers also tweeted their reactions on the budget:
Nilesh Shetty, Associate Fund Manager – Equity, Quantum AMC
The budget has lost a lot of its relevance. But in this case the people were looking at signalling from the government in terms of some of the key problem areas what can the government do be it slowdown in consumption, be it problem in the credit market of below investment grade.
But essentially the government has not done much in these pockets. So there is a big disappointment and the income tax changes have essentially made it more complicated where now they have introduced multiple slabs and created options for people to move across different tax regimes which complicates matters instead of simplifying it. Also, we have to wait for fine print to know which exemption have been removed.
Jinesh Gopani, head- equities, Axis AMC
It was a neutral budget. From a budget perspective, I don’t think it’s very negative or positive. The markets are down because there were a lot of expectations from the budget.
The knee jerk reaction is cold due to the LTCG tax that the market was expecting to go has not happened.
There are some good things in the budget like sovereign wealth funds given absolute tax benefit for five years if they invest in infrastructure related projects so that is a clear direction of bringing FDI into India. This is a big move.
Personal income tax also they have tinkered around giving benefit to the salaried people in the lower income tax bracket. Once the confusion resolves, things will be clearer.
The focus has come back to the basics of buying only good quality companies who are delivering good earnings growth. Ultimately, the markets are slave to earnings growth so, as and when the earnings growth revive, market will give them benefit of doubt and those stocks or companies will do well.
Swarup Mohanty, Chief Executive Officer at Mirae Asset Global Investments
The government has been emphasizing on financial savings. The removal of exemptions have come early and could slow down the process.
Taher Badshah, CIO, Equity- Invesco Mutual Fund
Through Union Budget 2020, the Finance Minister tried to provide a long term growth outlook for the India economy even as it probably missed satisfying market’s near term expectations to accelerate growth. Initiatives such as personal tax rationalization and abolishment of dividend tax are positive but the quantum of overall savings for the working class and investors is still not fully clear.
We think the restated math with regards to fiscal deficit for FY20/21 and deviation from the FRBM (Fiscal responsibility and Budget management Act) path was on expected lines.
Govt’s targets on disinvestment however appear considerably aggressive.
Overall, our base view of a slow and modest economic recovery in 2020 v/s the last two years remains on the back of an improving global macro, better domestic liquidity and recovery in rural demand.
Srinivas Rao Ravuri, CIO - Equities, PGIM India MF
First takeaway is that we should lower importance given to budget. Over a period of time, we have to look at budget as a routine exercise aimed at tweaking few things on yearly revenues and expenditure of the Government of India for the year. Unfortunately, expectations were elevated especially on stimulus to revive/kickstart the economy. One should remember that if something needs to be done for the economy, it can happen outside budget also as we have seen in September 2019, when historical corporate tax rate cut was announced.
Key positives are a) tax exemptions given to sovereign funds to invest in India b) extending concessional corporate tax of 15% to power sector also c) removal of Dividend Distribution Tax. Key disappointments was on slippage of fiscal deficit - though slippage was in-line with expectations but absence of any concrete measures to accelerate spend on core sectors like infrastructure is a concern.
Rajat Jain, CIO, Principal Mutual Fund
Given the slowing economy, the finance minister has tried to stimulate consumption by reducing tax rates esp. to the persons in the lower tax bracket. The continued focus on rural areas and infrastructure is welcome. The government has been reasonable in forecasting the nominal GDP and the growth in tax rates.
Sailesh Raj Bhan Deputy CIO - Equity Investments, Nippon India Mutual Fund
“Govt has taken a bold step to move ahead with higher spends, simplification of tax regime and fuelling infrastructure developments despite fiscal constraints. A tall divestment target will be keenly monitored but signifies a big intent towards fiscal prudence."
Vetri Subramaniam, Group President & Head-Equity, UTI AMC
The slowdown in India has been evident since the end of 2018. The government has taken several measures to address this slowdown in recent months. Monetary policy has also turned accommodative and over time we expect growth to respond. For India growth is as much an element of macro-economic stability as is the fiscal deficit, current account deficit or inflation. In this context the budget as a policy tool provided an opportunity to deliver a counter cyclical fiscal impulse. This strategy is not without risk given the size of the government’s borrowing program and our historically weak track record of fiscal consolidation. The government has made the decision in today’s budget to stay on the path of fiscal consolidation. This choice, while prudent, raises downside risks to growth. On the positive side the government’s fiscal resolve creates headroom for the monetary authorities to remain supportive of growth.
Nilesh Shah, MD & CEO, Kotak Mahindra AMC
“The budget is good on intent. However, the key is efficient execution in a time-bound manner. There are many positives to simplify things and encourage entrepreneurs but again, key will be execution in a time-bound manner. Intent needs to be converted into implementation."
Some mutual fund managers also tweeted their reactions on the budget:
#Budget2020 @ETNOWlive @abcabslmf @nsitharaman Listing of @LICIndiaForever is a big move ; this can create addition… https://t.co/zjlEKJQdpb
— A Balasubramanian (@MFBALA) 1580542012000Anyone providing financial products, mortgages, MF, insurance, NPS, PPF etc. to clients basis tax rebate can’t use… https://t.co/yrvnXxxcBu
— Aashish P Sommaiyaa (@AashishPS) 1580555122000We are delighted at the recognition of the success of #BharatBond ETF in #Budget2020. Bond ETFs have the potential… https://t.co/glSPHq5tBm
— Radhika Gupta (@iRadhikaGupta) 1580550636000
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