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Here's what top mutual fund managers think about budget 2019

Finance minister Nirmala Sitharaman on Friday presented her maiden budget in the Parliament.

, ET Online|
Last Updated: Jul 05, 2019, 05.27 PM IST
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Budget 2019
Radhika Gupta, CEO, Edelweiss Asset Management
“Coming on the back of very high expectations, the budget covered a wide range of issues from infrastructure and disinvestment to electrical vehicles, education and startups. Disinvestment is a stated priority, and extending tax incentives to retail investors in CPSEs oriented ETFs will provide a big push to this category, hopefully both for equity and debt ETFs. The reiteration that NBFCs are a cogwheel of the Indian economy, and incentivising PSBs to buy assets from NBFCs will ease the current credit environment which is positive for debt mutual funds. The government also emphasized the need to deepen the corporate bond market, and encourage retail participation in debt, which has been limited so far.”

Akhil Mittal, Senior Fund Manager, Tata Mutual Fund
“The government has laid steep revenue target on disinvestment. CPSE ETFs have been successful to a large extent and government is looking for a greater participation from general public on this account. Hence government will offer an investment option on lines of ELSS (tax breaks) for ETF investing in CPSEs. This should encourage long term investments in CPSEs and also provide an alternate investment option to retail investor which is tax efficient. The government would also make a concession on STCG tax in addition to extending concession on LTCG tax on FoF set up for disinvestments in CPSEs.

"The government has proposed tax benefits for mutual funds in IFSC in GIFT city and also on income distributed by mutual funds derived from transactions on stock exchanges set up in such IFSC in Gift city. This looks good visionary step but might not translate to immediate actionable.

In order to provide support to NBFCs reeling under current macro risk off environment, the government has offered partial credit guarantee scheme for six months investment by banks into securitised assets of such NBFCs. Though this might not look like a direct benefit to NBFCs, it would make banks look at securitisable assets of such NBFCs more favourably.”

A Balasubramanian, CEO, Aditya Birla Sun Life AMC
"Fiscal prudence, providing support to NBFC and making HFC to come under RBI, enabling issuance of sovereign bonds are moves in the right direction. Emphasis on the development of bond market should bring some serious measures from both the RBI and Sebi jointly to support this announcement."

Kumaresh Ramakrishnan, Head-Fixed Income, DHFL Pramerica MF
"The budget for FY20 continued to build on the work of the past five years. The focus clearly was on simplifying procedures in tax administration (making Aadhaar and PAN interoperable), streamlining existing labour laws by re-grouping them under four codes and attracting capital by permitting FPIs to invest in listed REITs, FPIS/ FIIs to invest in debt issued by IDFs and easing KYC norms for FPIs.

Key highlights include a growth stimulus planned through PSU bank recap of Rs.70,000 crore. NBFC sector can now downsell loans up to Rs one trillion to banks under a backstop from the government to cover first loss up to 10 per cent.

In a bold step, the budget also announced the plan to issue sovereign GOI bonds overseas given the lower cost of capital and given that India’s sovereign external debt to GDP is less than five per cent.

Fiscal deficit for FY20 has been marginally lowered to 3.3 per cent (from 3.4 per cent in the interim budget) through higher divestments at Rs 105,000 crore (Rs 80,000 crore last year). Marginal increases to direct taxes (raising surcharges in higher brackets) and some excise and customs is forecast to help lower the deficit.

The combination of further focusing on ease of doing business, raising revenues and fiscal discipline combined with targeted spending such as bank recap should in our view lay the ground for a gradual turn around in the economic momentum and growth recovery.

Given the subdued inflation trajectory, the budget’s decision to stick to 3.3 per cent on fiscal deficit and improving liquidity in our view has made duration curve attractive. Given the proposed fiscal discipline, we could expect further easing from RBI, which renders our view positive in the near to medium term. "

Jimmy Patel, CEO, Quantum AMC
"The mutual fund industry was looking forward to this budget and I was hopeful to get some attention from the maiden budget speech of finance minister Nirmala Sitharaman. The wish list will remain a wish list for yet another year. Much was expected by the middle class but there don’t seem to be too many benefits for the middle class. There are no impetuses on savings for the middle class. Moreover government has kept fiscal deficit unchanged. We will have to await for the financial prudence by the government.

Instead of raising money overseas, the government should have displayed more confidence by increasing the limits for foreign investors under the FPI route into the Indian government bond market and encourage global investors to invest in India and help develop the local bond market. The increase public holding in listed companies to 35 per cent from 25 per cent proposed to Sebi by finance minister will result in more inclusive participation in share holding, however many promoter led companies and MNCs may prefer delisting as was noticed in the recent past."
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