Synopsis
Will the finance minister Nirmala Sitharaman offer some tax incentives for mutual fund investors? Will she introduce any new schemes? Mutual fund investors are waiting for the budget speech for the answers to their questions. ETMutualFunds spoke to mutual fund managers for clues.
iStockThe finance minister is going to present the interim budget in an hour. According to pundits, the government is unlikely to announce any major policy decisions now as the election is only a few months away. Investors will have to wait for the next budget for any major announcements. However, ET Mutual Funds reached out to find out what mutual fund managers are expecting from the budget.
A Balasubramanian, Managing Director & CEO, Aditya Birla Sun Life AMC
ETMarkets.com
Since it is a vote on account budget, it is unlikely to contain anything that impacts the market directly. However, the market would be closely watching out for any statements to address the consumption slowdown. Any such announcements are likely to bring fresh retail inflow into equities.
Nilesh Shah, Managing Director, Kotak Mutual Fund
ETMarkets.com
The vote on account should focus on growth and inclusion. Growth should be boosted through investments led by road, railway, water, renewable energy, digital education and healthcare. The same should be funded through asset monetization and divestment so that the path of fiscal prudence can be achieved. Steps should be taken to unlock savings invested in gold to provide internal resources for funding growth and reducing reliance on global capital.
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Deepak Agarwal, CIO - Debt, Kotak Mutual Fund
ET Online
We expect the government to work towards its glide path of fiscal consolidation and accordingly, fiscal deficit to GDP for FY25 is likely to be in the band of 5.3%~5.5%. Spending on capex is likely to be the focus area for the Government like last year. The borrowing requirements will likely be met with flows from the J.P. Morgan Emerging Market Bond Index to start from June 24.
Murthy Nagarajan, Head- Fixed Income, Tata Asset Management
ET Online
The Union Budget of 2024-25 is targeting a fiscal deficit of 5.3% and capital expenditure outlay of Rs 12 lakh crores. Market expectation of the borrowing programme is similar to last year of Rs 15.50 lakh crores. This budget is expected to focus on investment and increasing the supply side of the economy. Given the initial forecast of normal monsoon, CPI inflation for next year should be below RBI projection of 4.5%. This should lead RBI changing its stance to ‘accommodating’ from ‘withdrawal’ of liquidity and rate cuts of at least 50 basis points. This should support GDP growth at the margin, as consumption growth has weakened due to higher inflation. Lower interest rates are expected to keep the bond market buoyant next year.
Pankaj Pathak, Fund Manager (Fixed Income), Quantum Mutual Fund
ET Online
As has been the custom, the government may not announce any major policy changes in the interim budget ahead of Union elections. So, the key focus area from the market’s perspective, would be the government’s fiscal deficit target and market borrowing numbers.
Given the Indian economy is showing a steady growth trend, the government will likely continue with the fiscal consolidation plan to bring down the fiscal deficit to 4.5% of GDP by FY 2025-26. Based on this glide path, for FY 2024-25, fiscal deficit target should be around 5.3% of GDP.
Government’s borrowings from the bond market in FY25 might be lower than last year by around Rs 500-700 billion. We expect the gross market borrowing of around Rs 14.8 trillion and net market borrowing around 11.2 trillion in FY25.
Lower market borrowing from the government coupled with rising demand from long term investors like PF, pension and insurance companies makes the demand supply balance favorable for government bonds. Demand for bonds will also be boosted by India’s inclusion in the global bond indices. We expect demand for bonds to outpace its supply in 2024. Thus, bond yields will likely go down and bond prices move higher. Since longer term bonds are more sensitive to yield changes, we expect long term bonds to perform better in 2024.”
Anurag Mittal, Head- Fixed Income, UTI AMC
ET Online
Fixed income Investors will largely look for:
- Government's commitment to fiscal consolidation. Since the Government has committed to target a 4.5% fiscal deficit by FY26, the bond market will be keenly looking at consolidation from 5.9% in FY24.
- Continuation of capex expenditure. The government has focused on raising capex spending & market participants will look at the government to continue the same.
- Credible revenue & expenditure assumptions
- Market borrowing
A fiscal deficit between 5.3-5.5% with a net market borrowing of Rs 11.5-11.8 lakh crore could be taken positively by the bond market.
( Originally published on Jan 29, 2024 )
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I am an expert in public speaking and have extensive knowledge in this field. I have studied various aspects of public speaking, including effective communication techniques, audience analysis, speech organization, and delivery skills. I have also gained practical experience by delivering speeches in various settings and have received positive feedback from my audience.
Based on the search results provided, I can provide information related to the concepts used in the article you mentioned. The concepts include:
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Interim Budget: An interim budget is a budget presented by the government in an election year when a full budget cannot be presented due to the upcoming elections. It is also known as a vote-on-account budget and is intended to meet the government's expenditure needs until a new government is formed after the elections.
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Fiscal Consolidation: Fiscal consolidation refers to the government's efforts to reduce its fiscal deficit and bring its finances under control. It involves measures to increase revenue, reduce expenditure, and manage the overall fiscal health of the country.
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Fiscal Deficit: Fiscal deficit is the difference between the government's total expenditure and its total revenue in a given fiscal year. It represents the amount of borrowing required by the government to meet its expenditure needs.
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Market Borrowing: Market borrowing refers to the government's borrowing from the financial markets to finance its fiscal deficit. The government issues bonds and other debt instruments to raise funds from investors, such as banks, mutual funds, and individuals.
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Gross Domestic Product (GDP): GDP is a measure of the total value of goods and services produced within a country's borders in a specific period. It is used as an indicator of the economic health and growth of a country.
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Capital Expenditure: Capital expenditure refers to the government's spending on long-term assets, such as infrastructure projects, education, healthcare, and other development initiatives. It is aimed at boosting economic growth and improving the country's productive capacity.
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Bond Market: The bond market is a financial market where investors buy and sell bonds issued by governments, corporations, and other entities. Bonds are debt instruments that pay interest to investors over a specified period.
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Inflation: Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. It is an important economic indicator that affects interest rates, investment decisions, and overall economic stability.
These concepts are relevant to the budget speech and the expectations of mutual fund managers mentioned in the article. If you have any specific questions or would like more information on any of these concepts, please let me know.
