In 2016 India's mutual fund managers had to pay more heed than usual to political and economic events both globally as well as in India. The full impact of many of these events is yet to play out and will remain an overhang on equity markets this year.
Mahesh Patil, co-chief investment officer of the equity division of Birla Sun Life Asset Management Company is optimistic that the upcoming Union Budget will announce a slew of measures to stimulate growth and bring back consumer confidence to ease the pain caused by the demonetisation. Affordable housing and corporate taxes will remain in focus, he says.
Aswe have seen in the last budget, in the rural economy, big spending by thegovernment should continue. There is a lot of effort by the government to stimulate housingat the lower end, especially affordable housing. It has not really taken offafter the last budget where some benefits were given. We see more direction inthat area on the policy front in the budget to really kick start affordablehousing both urban and rural. Besides that, there is expectation that therewill be some cut in tax rates at the corporate level. The finance minister hadgiven a glide path of bringing down the corporate tax from 30 percent to 25percent. I think they should make a beginning this year.MaheshPatil, Co-Chief Investment Officer-Equity, Birla Sun Life AMC
Also Read: The Tax Changes In Budget 2017 Are An Open Secret
The process of remonetisation and adjustment to the Goods and Services regime, assuming it is implemented by July 2017, will take at least the next two quarters, Patil says. But thereafter, double-digit earnings growth is plausible, he adds.
Takinginto account GST will be rolled out on July 1, it could lead tosome disruption at that point in time as you would probably see companies rundown on inventories. Considering all these factors, we think that a bulk of theimpact will show in the next two quarters. Forfinancial year 2017-18 as we move forward, we are looking at earnings growth to bearound 18 percent. It will partly be driven by growth in the second half.There are couple of sectors like financials where we are seeing strongergrowth. Again, the base is very supportive for companies especially for publicsector banks and large corporate banks where the earnings are quite depressedthis yearMahesh Patil, Co-Chief Investment Officer-Equity, Birla Sun Life AMC
Patil sees resurgence in earnings growth in automobile, oil and gas and media sectors along with financials. He expects the full benefit of interest rate cuts to come into play next year.
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