A taxpayers budget with political undertone stands to change the scenario for consumption based stocks. Slab change with no Tax for people earning up to 5 lac + 1.5Lac investment*, Secondly no TDS on income from Post office deposit up to 40000 and on rental income up to 240000 per year are great benefits along with that no tax on second house and increase in the standard deduction limit from 40k to 50K are welcome moves.
So, to sum it all these are those factors that are going to bring in a lot of liquidity to the market in terms of investment. The high impact of this is to be seen on consumption-based stocks. Secondly, when we put that in perspective the slow down we have seen in real estate in the last few months in an environment of higher interest rates may get its relief with the above announcement coupled with efforts to boost affordable housing.
So, all this is to be seen in next 2-3 months taking effect in the sector and we expect the turnaround specifically in consumption based stocks in these few months. Those with visible earnings growth and better top-line are going to see this in their Q1FY20 numbers.
For Corporate, we have not seen anything luring as such since it's an Election year and we expected this to be more populist that focus on mass rather than industry. Hence it focused on putting more money in a taxpayers pocket and the net effect comes down to Auto, Consumption stocks, Consumer durables.
Markets as well have rejoiced and has been trending up from lower levels of 10600. There may be some profit booking, consolidation in the short term as prices tend to absorb the Budget we expect the momentum to remain strong. Though we have said this and reiterate that the overall range for the market seems to be 11000 - 10600 in the short term. Only a close above 11000 should see some aggressive short covering.
Since we have seen a lot of announcement that focused on providing the liquidity to Taxpayers we expect the winners from this budget are clearly Automobile space, FMCG, Consumption, Consumer durables, and Reality. It's a win-win situation specifically for the markets.
The net effect should be positive on these sectors but investors should be aware that not be biased by sentiment in the short term since the effect may take almost 2-3 months. And this is an election year so the volatility may be coming back to haunt. Investors should be sticking to blue-chips, large caps and accumulate on declines in a scattered approach rather than going out aggressively to buy.