EUR 120.00 For Business Accounts Only

MOSL: Morning India (3/February/20): 1. Union Budget 2020-21 (Lacks the punch; no fiscal stimulus); 2. Financials – Insurance; 3. Automobiles Volume Numbers; 4. Amara Raja; 5. Strides Pharma; 6. Indostar Capit

Morning India (3/February/20):

Today’s top research idea
Union Budget 2020-21: Lacks the punch; no fiscal stimulus
** The Union Budget 2020-21 was presented on 1st Feb'20 amidst a very challenging economic environment. Although it was not acknowledged explicitly, the budget appears to have realized the fiscal limits. Not surprisingly then, it did not enough excite the market, where expectations were running very high.

** Overall, as expected, while the government has relaxed its fiscal deficit target by 0.5pp of GDP in FY20, the market borrowings remain broadly unchanged at INR4.7t and the additional deficit is actually funded by the national small savings fund (NSSF) and a reduction in buybacks. Further, although the fiscal math faces challenges, the fact that FY21 bond supply is in line with expectations may support the bonds market.

** From the economy perspective, in sharp contrast to expectations, there were no major boosts to consumption (as we had hoped). Another concern is that investments by the government and CPSEs are budgeted to remain stagnant in FY21. With the fiscal policy accepting its limits and the inefficacy of monetary easing, a meaningful economic revival may not pan out next year.

Piping hot news
Explaining Budget proposals: Headed for lower tax and no exemptions, says FM
Finance minister Nirmala Sitharaman said the idea behind the new regime unveiled in her budget is to “eventually move towards lower tax and remove exemptions.” At a media briefing on Sunday, she said, “We have made cuts for the middle class, lower middle class. The idea is to eventually move towards tax rates (that are) significantly lower than prevalent today; a regime simpler to comply (with); and (to) remove exemptions.”