Nifty still seen at 12,200-12,400 by Dec despite scary Friday post Budget 2018

Nifty should consolidate around 10,700-10,800 in the upcoming weeks but we retain our year-end target of 12,200-12,400 for the broad indices.

Investment Imperative Group

  

The Union Budget 2018 has evidently focused on increasing expenditure across the critical sectors than giving rebates, deductions on the direct taxation front. The government of the day is confident of spending taxes well for the upliftment of lower strata of the society than allowing for automatic course correction through market forces.

Rural contribution in terms of job creation, as well as participation in the mainstream, is inevitable for clocking 9-10 percent average growth over the next decade. Hence, there has been major impetus and allocation for rural infrastructure, healthcare facilities for lower middle and lower class, education sector which was long due for huge allocation.

Irrigation, affordable housing and civil construction companies focusing on rural infrastructure will see higher allocation for projects. Healthcare, education will see a systematic increase in spending over the next few quarters. Whereas, implementation of smart cities project, urban transport, electrification and waste management will be keys for justification of allocation towards the projects.

We expect flows towards equities to continue from investors in and outside of India given that post-tax returns on Indian equities continue to remain attractive when compared with debt, deposits, and alternative offerings.

Going forward, markets can see some retracement in the next few weeks on a marginal deviation of fiscal targets and long-term tax addition on equities. However, earnings and overall political landscape including elections, implementation of fund allocation will drive equities.

We are expecting corporates across manufacturing, real estate, automobiles, cement, steel, infrastructure to see a strong rebound in earnings in the December quarter.

Minimum support price (MSP) for farmers, farm loan allocation and focus on FPUs will help improve income, jobs at the farm level. The move will also allow farmers to consolidate, adopt new technologies and target higher productivity, exports which in turn should help retain inflation numbers and give a medium-term boost for a long-term solution.

Healthcare spending will push for facilities, hospitals in Tier II and Tier III cities resulting in an exhaustive coverage of medical facilities for the rural population.

On markets, Nifty should consolidate around 10,700-10,800 in the upcoming weeks but we retain our year-end target of 12,200-12,400 for the broad indices.

MORE WILL UPDATE SOON!!