Budget 2022 - Disseminated

 

The attempt to lift the economy from vagaries of the pandemic-led slowdown, the Union Budget for FY- 2022-23 focused on right kind of spending of its scant resources on the physical and digital infrastructure, to keep up the recovery momentum intact. The Budget is encircled around three key themes - Infrastructure, Digital and Manufacturing.

 A few key highlights are enumerated below for your kind reference with our perspectives on the Union Budget which also includes our Equity and Fixed Income market outlook

 1. Nominal GDP growth estimated at 11% for FY23.

2. Fiscal deficit estimate pegged at 6.9% of GDP for FY-22 and 6.4% for FY23.

3. Net market borrowing of government bonds for FY-23 estimated at INR 11.59 Lakh Cr vs INR 8.76 Lakh Cr in FY22.

4. Disinvestment receipts for FY23 pegged at INR 65,000 Cr, vs INR 78,000 Cr for FY-22.

5. No change in Direct Tax; Income from transfer of virtual assets (like crypto currencies) to be taxed at 30%.

6. Cap on surcharge on long term capital gains arising on transfer of any type of assets at 15%.

7. National Tele Mental Health Program to be launched for quality counseling.

8. Proposed issuance of sovereign green bonds as part of government’s borrowing program in FY23.

9. Digital Rupee, using block chain technologies to be issued by the RBI starting 2022-23.

10. 100% of post offices to go digital and will come on the core banking system.

 Equity Market Outlook - The tight-rope fiscal walking could have been augmented with steps to drive growth through higher private spending and capex. What the budget delivers in terms of being fiscally pragmatic and being non-inflationary, it falls short on efforts to stimulate aggregate demand. The PE valuations of stocks are expected to get corrected with the fourth quarter result. Sensex may be on lean pitch, considering the advance tax season which results in liquidity crunch, creating good opportunity to participate for long term objectives.

 Fixed Income Outlook - Bond yields may continue to inch higher in the backdrop of increasing crude oil price, higher inflation, geopolitical tension, higher supply of government bonds, and an exit from the prevailing loose monetary policy globally. Market will closely watch the upcoming RBI monetary policy. Shorter duration funds are the order of the day.

(Note: Valuable inputs have been taken from Franklin Templeton & HDFC Mutual Fund reports on Budget)