Markets saw a relief rally, the first of its kind in many years on Budget day. Veteran investor Ramesh Damani says the markets had discounted the worst before the Finance Minister Arun Jaitley's speech began and therefore reacted positively when most fears were dispelled.
None of the draconian measures that the markets were expecting like the long-term capital gains tax, a raise in service tax, huge fiscal deficit, none of which happened. It was a prudent, disciplined, working-like budget which the market favoured and reacted with enthusiasm once the speech ended.Ramesh Damani, Member, BSE
The budget's focus on fiscal discipline and the clarity on FPI taxation came as music to investors' ears, with the Sensex leaping 486 points on Wednesday to close at a four-month peak. Bank and real estate stocks powered the show. The capital market welcomed the budgetary proposal to keep the long-term (LTCG) and short-term capital gains tax (STCG) unchanged.
Also Read: Budget 2017 Likely To Drive Foreign Flows Back Into The Indian Market
Disinvestment To Unlock Value
One of the key areas that Damani emphasised is the government's disinvestment plans. The government has pegged its FY18 disinvestment target at Rs 72,500 crore.
The Union Budget proposed moving ahead with the listing of the railway public sector undertakings (PSUs)—Indian Railway Catering and Tourism Corp. (IRCTC), Indian Railway Construction Co. Ltd (IRCON) and Indian Railway Finance Corp. Ltd (IRFC) in a time-bound manner. Damani sees huge value unlocking potential in listing of PSUs such as Airports Authority of India (AAI), IRCTC and Hindustan Aeronautics.
Anytime that PSUs are listed, there is a tremendous unlocking of value that takes place. The management becomes more focussed on delivering more value to the shareholders. These companies often list very cheaply since they government itself is unaware of the value of these companies.Ramesh Damani, Member, BSE
Damani also sees huge scope of value unlocking in strategic disinvestment of companies like Bharat Earth Movers Ltd. (BEML), Steel Authority of India Ltd. (SAIL) as well as National Mineral Development Corporation Ltd. (NMDC).
Single Oil Behemoth?
The government also proposed to create one single major oil public sector company which may separate refining and marketing functions. Damani called this a favourable proposition which would create value for investors going ahead.
Also Read: Budget 2017: Government Plans To Consolidate State-Run Oil Companies
Focus Back To Global Cues
After the budget euphoria dies down in the next few days, the focus will shift back to global factors, Damani said. Markets won't be too perturbed by the 3-4 rate hikes hinted at by the U.S. Federal Reserve. Instead, actions of U.S. President Donald Trump will hold the key for investors.
Years of good economic growth, low interest rates and lower oil prices should hold the markets in good stead and push the indices higher in the near future, Damani added.
Given the fact that the United States is a democracy, and both the houses of the congress are fairly resilient, they will not allow any unchecked measure to be passed and signed into a law.Ramesh Damani, Member, BSE
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