Dipen Shah (Kotak Securities) Reaction on Budget 2012

We believe that, the fiscal deficit number can be achieved provided there is follow-up action on the proposals. We expect further action on reducing the subsidy burden. We also expect more initiatives on various administrative and procedural reforms, which can make the operating environment more conducive for the private sector.

These initiatives will be the pre-requisite for the private sector to get back the confidence and start investing. Also, action on subsidy reduction will likely result in moderation in interest rates, thereby helping growth.

On current account deficit, the import duty increase on Gold should help it moderate a bit, while raising additional revenues for the Government. This may also ease the pressure on the rupee, which is a source of inflation.

Overall, we see the budget providing a thrust on growth through consumption-related initiatives and also through public sector investments (increase in plan expenditure). More private sector investments will be encouraged by the administrative reforms. 

For the stock markets, there is some benefit in terms of a partial reduction of STT on cash market transactions. We await more clarity on the deduction which has been made available to first-time individual investors in stock markets. We expect the markets to remain range-bound in the medium term and believe that, a bottoms-up approach will be the best approach over this time-frame.”

Mr. Dipen Shah
Head of Fundamental Research, Kotak Securities