Budget 2019; Overall environment remains benign says Jignesh Madhwani

Jignesh Madhwani, Promoter & Partner, Torin Wealth Management has said that the newly appointed Finance Minister positively surprised the debt markets by reducing the fiscal deficit target from 3.4 per cent as laid down in the Interim Budget to 3.3 per cent. Gross borrowing, net borrowing, switches and buybacks have been retained as given in the Interim Budget which is a relief.

"On a closer look at the fine print, while the fiscal deficit at the absolute level is almost the same as in Interim Budget: Rs 7,03,760 cr (7,03,999 cr in Interim) what has been increased is the Nominal GDP assumptions from 11.5 per cent to 12 per cent. This helps in therefore showing an optically lower fiscal deficit target. Among other notable items in the Budget, the GST collections have been scaled down by almost Rs 1 lakh cr which makes it more realistic considering the trend in recent collections. Income Taxes target has also been reduced by 50000 cr. Thus the Revenue Deficit is higher at 2.3 per cent as compared to 2.2 per cent projected in the Interim Budget," said Madhwani. He further added that the mention of sovereign bond issuance in foreign currency as diversification and to alleviate demand pressures domestically also aided in the rally today in gilt and bond prices.

"The ten-year gilt benchmark as on 2.15 pm on Friday afternoon is trading around 6.65 per cent, 10 bps lower than yesterday's level. With the Budget announcement out of the way and govt sticking broadly to the fiscal parameters, markets will now move on to other events. The overall environment remains benign with subdued headline and core inflation, falling global bonds yields, dovish global central banks and ample banking system liquidity," observed Madhwani.