Budget Expert take: Thrust on financial savings continues

By S Naren
Chief Investment Officer (CIO)
February 02, 2017
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For investors on the sidelines, my advice would be to invest right away

Budget 2017 was one of the most keenly awaited budgets in recent years. And, surely, Finance Minister Arun Jaitley presented a well-rounded Budget that was both progrowth and prudent, maintaining the path of fiscal consolidation.

Since 2013, the government has consistently provided the much-needed thrust for financial savings over physical savings, and the intent has been visible this year as well.The reduction of income tax in the lowest tax bracket is likely to leave more money in the hands of the people, and it is a major positive for capital markets. As a result, the equity market was buoyant as was visible in the trade. Given the balanced stance taken by the government when the FM could have been populist, we believe there is scope for equity markets to re-rate from here. Also, there is a possibility of increased inflows from domestic investors in the near-to-medium term and valuations are likely to expand.In terms of earnings of India Inc., there will be challenges in several sectors, but the low-interest-rate environment will prove to be a major positive.

Additionally, the government has provided impetus to the infrastructure sector, with enhanced funding for the transportation sector as a whole. We believe this is one sector that is likely to see increased interest from investors in the near-to medium term. To make the most of the infrastructure story, an investor can consider infrastructure funds.

For investors on the sidelines, my advice would be to invest right away. This is with an understanding that there may be a case for intermittent volatility in the near term, due to uncertainties in the world economy. Hence, the best way to circumvent such volatility would be to invest in dynamic asset allocation funds.

This article was first published in Economic Times on February 02, 2017.