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Budget Review: Likelihood of lower than projected fiscal deficit, says ICICIDirect
- Union Budget 2022-23 can be aptly termed as adoption of a new growth template led by vital capex allocation to drive the economy. Outlay of capital expenditure of ~| 7.5 lakh crore, up ~35% YoY (at 2.9% of GDP), coupled with expanding the scope of private capex through PLI for new age segments, is expected to deliver inclusive growth, job creation and welfare for all.
- Among infrastructure segment, major emphasis has been placed towards highways (capex allocation up ~55% YoY) and water (allocation at Rs 60000 crore, up ~33% YoY in the “Har Ghar Jal se Nal” scheme). With the dual objective of growth and welfare, the Budget has hit the right chords in the current macroeconomic setup.
- Interestingly, the Budget, presented in the backdrop of a likely pandemic aftereffect, has seen relatively conservative estimation of growth (merely ~11% nominal GDP in FY23) and tax receipt growth of ~14% YoY (excluding excise cut). Thus, there is a likelihood of lower than projected fiscal deficit, in our view.
The bold capex-led growth oriented Budget augurs well for the market. The 8 to 8.5% GDP growth for FY23 is credible and the consequent growth in corporate earnings can be impressive. Capital goods, cement and steel stand to benefit from the big push in capex. A new growth cycle on the back of the massive capex has the potential to crowd-in private investment leading to acceleration in the nascent credit growth. Banks and NBFCs stand to gain from this. Now that the budget is behind us the market is likely to react more to global cues. The correction and the recent rally were, in fact, reaction to global market cues. FIIs sharply trimming their selling to just Rs 22 cr helped the Budget rally. But FIIs are likely to sell the rallies again since they consider Indian valuations excessive.
– Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services
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Nifty perched above 17,700 level
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Pre-open session: Sensex gains nearly 300 pts; Nifty above 17,650
Q3 results today
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