Feb 26, 2010|
FM on the right track
'Markets cheer Budget 2010', screamed one headline. 'Sensex salutes Union Budget', said the other. Clearly, bouquets far outweighed the brickbats in response to the Union Budget 2010-11 that was tabled in the parliament today. Count us amongst the one offering the bouquets! Of course, it would be too premature to pass any judgement right now. But the budget clearly showed that the Government is in no mood anymore to drive down the wrong path. Most of all, in the field of fiscal prudence. And it also showed that the previous two years were an aberration. An aberration that had arose as a result of political compulsions and a severe global economic turmoil. Absent any of these factors, the Government seemed quite intent to take the right steps. Steps that will put the economy on a structurally higher growth path and at the same time strive for financial inclusion.
And clearly, markets seem to have liked this positive gesture by the government. Most of us would remember that during the last budget, it was the ballooning of the fiscal deficit that had perhaps caused the maximum heart burn for the investors, resulting into the markets going into a tailspin on the budget day and the Sensex shedding a massive 870 points. But things were starkly different today. The FM promised that the Government would strive to shave off fiscal deficit by nearly 3% as a percent of GDP by FY13, thus helping lift investor spirits.
Fiscal deficit is not entirely bad in itself. But increasingly in India, more of it has been finding its way into wasteful expenditures that do nothing to improve the long term productivity and economic health of the country. Thus, with the same expected to come down, markets heaved a sigh of relief that money would now be spent towards more productive purposes, thus boosting economic growth.
Reduction in fiscal deficit was not the only positive for the markets. The Finance Minister also chose to take away a lot less money from salaried professionals by way of taxes thus boosting their disposable income and further strengthening the Indian consumption story. Also, availability of credit, so very essential for big ticket purchases like auto and homes, is all set to improve what with the Government deciding to give away more banking and NBFC licenses and also strengthening the capital base of public sector banks.
It should be borne in mind that all these measures were over and above the ones that the Government has now started taking on a regular basis and the ones so very essential for the sustenance of the Indian growth story like focus on infrastructure, employment guarantee schemes, greater emphasis on education and health and the like.
In a nutshell, while the Finance Minister did nothing that could take away from the near term India growth story, it took further measures like showing a firm resolve to rein in the fiscal deficit that could do wonders to the long term India growth story and put us on a higher growth path. And there can be no better news for the investors as this would translate into their wealth increasing at a stronger pace than before. Thus, if one is looking to invest in the markets from a 3-5 year perspective, there is a strong chance that the returns in the region of 12%-15% annually that the investors have come to expect from Indian stock markets from a long term perspective, could well be surpassed. Of course, one will have to stick to companies favorably positioned to ride the India growth story run by a competent management team and available at reasonable valuations. The FM seems to have done his bit. Now, it is your turn to take advantage of it.
More Views on News
Jul 25, 2017
Equitymaster HQ has been infiltrated. Valuable stock ideas have been leaked. Who's responsible?
May 27, 2017
What happens when minority shareholders are short-changed in the normal course of business?
Feb 15, 2017
PersonalFN believes SEBI has taken a step back-apparently in the admission of it going overboard with the regulations.
Aug 24, 2016
And here's your chance to claim a free copy of this book...
Aug 12, 2016
And Why India's demographic dividend could turn out to be a doubtful debt...
More Views on News
Aug 7, 2017
The data tells us quite a different story from the one the government is trying to project.
Aug 4, 2017
The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 7, 2017
Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407