The Union Budget 2022 has delivered along expected lines - Mr. Amar Ambani – Yes Securities
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By Mr. Amar Ambani, Senior President & Head – Institutional Equities, YES SECURITIES
In terms of economic support, especially on infrastructure and taxation fronts, the Union Budget 2022 has delivered along expected lines. The only material deviation happened on the fiscal deficit front, a 6.9% projected deficit for FY23, 100 basis points higher than what we anticipated. Precisely why bond yields reacted strongly, rising by over 17 basis to touch 6.85 per cent. We do sense some scope in shoring up receipts through higher divestment, than what the budget has estimated at Rs650bn for FY23. With Air India out of the way, and given the government’s long divestment pipeline, this could help the reduce the fiscal deficit. There is also scope for higher revenue through tax collection, if Covid does not disrupt the trajectory in FY23.
The FM has rightly focused on doing the heavy lifting by raising capex levels and investments in infrastructure. Even after accounting for spends through IEBR, the consolidated capital expenditure is stated to rise by 15%, which is heartening. To put it in context, the gross budgetary support of Rs7.5 lakh crore will likely be 19% of revenue collection versus range of 12-13% in last six years. While it is not rising as a percentage of GDP, it is on the right path.
A major positive was the status quo on taxation, especially direct taxes. Given that the government has witnessed bumper collections on the direct tax front, as well as on the GST front, the need of the hour was to not tinker with rates. The Finance Minister's gesture was applauded by the stock market.
While the key always lies in execution, we note several key strides around renewables, for a more digital economy, expected ECLGS scheme extension for MSMEs, more 'atmanirbhar' defence, more allocations to PLI schemes, and cuts in input duties for Refining industry and Gems and Jewellery.
No negative, it is said, is a big positive. Given a growth supportive budget, our conviction is higher for another strong year for equities. We continue to bet on a structural rise in consumption in India, and a boost to the ongoing 'unorganized to organized' trend. With the accelerated digital supercycle and strengthened corporate balance sheets, coupled with a benign period for cost of capital, we expect Indian equities to close 2022 on a higher high compared to 2021.
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