Today, the first budget of the Narendra Modi Government has been presented in the parliament. A Good Day to Write HardJ. Sorry Bruce Willis.
What is in it for people in highest tax paying bracket? A tax saving of Rs 20600/- for someone in highest tax bracket with no house loan. In case you have a housing loan, you will get some additional benefit depending on quantum of loan and interest being paid per annum as part of your EMIs.
Is the budget good? Seems like. Macro thrust of the budget is in the right direction. To make India a developed economy by increasing per capita GDP. But the proof of the pudding is in the eating. I think the preparation of pudding has started, it will be served to us in 2016 to eat. I am trying to put my foot in the mouth by taking a call that for FY 2016 Indian GDP should grow at 7.5% or so from present 4.7%. That would be a great leap and then the momentum of Modi’s actions will start chugging the engine of Indian economy leading to 8% and above growth, post 2017.
What is in it for investors? A regime of low interest rates in the future and lower inflation. Implications being that asset building will start with money being cheap. All of you looking for another property loan, wait for an year or so, interest rates will start becoming cheaper. For investors, the future looks bright for companies in the right kind of business.
For instance, in the budget, Excise Duty hike has been announced on cigarettes. This has led to hammering of cigarette stocks like VST Industries. A good opportunity to buy a good business. May be not that cheap but reasonable. Why? Because the business is debt free. Cash rich. Excellent dividend payout. Nice operating margins. Fair valuations. And biggest reason — smokers are immune to the finance minister. Successive governments have been increasing excise to earn more income every year, public health is a fig leaf. And despite increased excise every year, cigarette sales do not come down. All smokers know, nicotine is addictive. And, the Finance Minister also knows, he will get more revenue. I just bought myself some smokin’ stocks baby.
Good businesses, selling cheap will be difficult to find. Continue with your SIPs in mutual funds. Whenever markets fall, buy from your shopping list — some stocks on my list are Mphasis, Noida Toll Bridge (yet again, it is giving a 7% dividend yield), Zydus Wellness, Indraprasth Gas and Larsen & Toubro.
Acche Din Aane Waale hain……Sayonara.