10-point focus for post Budget investing

Sat, 28 Feb Pre-Open

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Unless you are a trader, keen to be part of the excitement of Budget day trading, there is no reason for you to be calling your broker as the indices swing during the Budget speech. And for those of you who consider yourself to be ‘investors', all the more reason to focus on the long term picture and shut out the noise.

As far as the research team at Equitymaster is concerned, no single economic event, not even a path breaking Union Budget can be the reason for making dramatic changes to our investing style. And we have no reason to believe that it will be different this time. No doubt we will be all ears and will analyze the Budget threadbare for you as we have done in the past, but our focus will be not just on the planning but also the execution.

In fact according to us, it's time for the government to move out of the phase of policy announcements to policy detailing. And as an investor you would be better off focusing on the policy decisions (if any) on the following big impact aspects rather than sector specific nitty gritties.

1. Fiscal planning though typically one of the highlights of the Budget every year, should be the only benchmark to rate the Budget. As long as the government lays down a prudent fiscal path, keeping growth in mind, the economy will do well. Implementation of the Goods and Services Tax (GST) could also be a move in this direction.

2. Subsidies and non plan expenditure have the most exploited areas of past Budgets and this is certainly something that this Budget should try to get away from if it attempts to be a non populist one.

   Infrastructure spend laid out in this Budget should not just be in terms of ambitious planning but also detailing in terms of sources of funds and deployment over a timeline.

   Real estate legislations could do with a major overhaul for freeing up infrastructure bottlenecks and the Budget should point in that direction.

   Banking is not really the Union Budget's area of focus, but having arrived at the decision to not waste taxpayer money in recapitalizing inefficient PSU banks, the government should also trigger consolidation of the same.

   Health of PSUs in the non banking space too deserve a lot of focus and the government should propose divestment of stake in non profitable ones.

   FDI is necessary in not just insurance and retailing but in several other sectors if the capex cycle is to revive. The Budget should clearly lay out regulations that can facilitate and attract FDI.

   Direct taxes have been yet another populist tool for past Budgets wherein government has tried to appease taxpayers with higher exemptions. However, it is pertinent that India's tax to GDP ratio is improved if the government is serious about its spending plans.

   Detailing of Make in India plan will be a necessary and important aspect of the government's financial planning as a lot of the proposed growth story hinges on the success of this plan. In fact detailing of the plan could attract a lot of the private sector investments that have been kept in the backburner for long.

   Detailing of Smart City Plan will ensure that the central and state governments are in sync about the vision to spend the infrastructure outlay in a time-bound manner.Thus the key takeaways from these focus areas (at least some of them) should lay the groundwork for your post budget investing. But do make sure that you keep your expectations realistic and pay attention to stock valuations.