With markets having factored in the positives already, investor expectation from the Budget is low. However, they believe that fiscal prudence from the government could spring a positive surprise.
A survey of clients by ICICI Securities, the brokerage subsidiary of ICICI Bank, revealed that while investors do not expect Budget outcome to dampen markets, exemption on minimum-alternate-tax (MAT) for infrastructure would be a positive.
At the same time, lack of increased incentives for housing, withdrawal of excise stimulus for FMCG, lack of tax-exemption extensions for IT (small-caps) and under-provisioning of fertiliser subsidies could cause market hiccups.
Almost all investors believe that increase in FDI limits is imperative for stock markets but almost half of the surveyed did not expect to see any change. A high percentage expected government to take populist measures and sceptical of fiscal prudence. Investor expectation is high on divestment front and infrastructure spending.
Despite low downside possibility, 55 per cent investors expect markets to move up, between 10 per cent and 30 per cent. Around 33 per cent expect markets to be range bound between +10 and -10 per cent. Surprisingly, the issue of securities transaction tax (STT) does not feature high on the investors list. Seventy per cent of investors surveyed by ICICI Security said that they do not expect the Budget to address the issue. The survey said that surprises are likely in infrastructure, PSU banks, real estate, fertiliser and IT sectors. A large number of investors do not expect infrastructure to get MAT exemption, the contrary could prove a positive.
Expectation on government to focus on infrastructure spending for the power is high. The contrary could prove negative for stocks. Ninety-five per cent do not expect government to negatively impact PSU banks by waive loans.
The survey said that despite low Budget expectation, a strong government can push-through major policy changes which, coupled with earnings improvement, and could boost markets.