Below is the Views On Today’s FM Announcement, which drived markets high By Mr. Deepak Jasani, Head of Retail Research, HDFC securities.
The markets have expectedly reacted very well to the relief measures announced today. The Govt has chosen to spur consumption and investment by giving reliefs in direct taxes (vs GST reliefs expected by different sectors).
The loss in terms of tax revenues will take time to be offset by the higher tax revenues gained on consumption (out of higher dividends/buybacks announced by corporates due to Corporate tax savings) or investments in new facilities by corporates out of their savings. In the meanwhile the fiscal situation could see some pressure. This could impact the interest rates unless the compensating liquidity from FPIs and FDI is large enough.
Reaction of FPIs to these impacts will be keenly observed. The markets could give some time for the above impact to trickle down before going back to cautious stance. Stressed corporates may however not benefit as the reliefs may not apply to them, as no GST reliefs have been announced. Large change in PSU divestment policy and changes in land, labour and judicial reforms may be more keenly awaited now than ever before.
Kharif harvest outcome (and its impact on rural income and spend) and festive season consumption spend in urban areas in mid to end October will also be looked forward to.
HDFC Securities Limited (HSL) is a SEBI Registered Research Analyst having registration no. INH000002475
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