Budget 2020: India’s Second-Best Performing Portfolio Manager Wants A ‘Credible’ Budget
A “credible” fiscal deficit target, “where numbers are believable”, will be a positive for Indian markets, says Marcellus’ Gubbi.
A “credible” fiscal deficit target, “where the numbers are believable”, will be a positive for India’s equity markets, said Marcellus Investment Managers’ Pramod Gubbi, days before Finance Minister Nirmala Sitharaman is set to present the Union Budget 2020-21.
“If you see a credible fiscal deficit number, something around 4 percent, with the assumptions around tax growth and expenditure fairly reasonable, the market will take that,” the founder of India’s second-best performing portfolio manager in 2019, which manages Rs 865 crore in assets, told BloombergQuint in an interview.
India may witness its biggest net tax revenue shortfall in a decade, causing the government to miss its target of keeping the fiscal deficit under 3.3 percent of the gross domestic product. That too when the economy is expected to grow at its slowest pace since 2008-09 and clamour to boost consumption and investment are rising.
According to Gubbi, the government’s focus on divestment in a more aggressive manner will fill this fiscal gap in the coming financial year. Other than that, a tax cut for the bottom layer—if the government comes up with “clever ways to squeeze out some sort of stimulus”—will lead to a positive reaction from the markets, he said. Gubbi also said even if none of these measures were taken and the budget’s revenue and expenditure calculations were realistic, the market “won’t mind”.
If we come out with unrealistic expectations in terms of tax revenue growth, it would be a negative.Pramod Gubbi, Founder, Marcellus Investment Managers
Possibilities For Capital Market
Gubbi said the positives for capital market were limited. A reversal, even restructuring, of the long-term capital gains tax, and a reduction in the dividend distribution tax would be a boost, he said, adding the likeliness is limited since they were only introduced in the last budget.
As for his equity investment strategy, Gubbi said Marcellus Investment Managers would continue to focus on quality stocks and industry leaders, irrespective of whether they are small or large caps. The portfolio manager will pick a dominant market leader in a small industry over a “challenger” or a “trailing company” which is a large cap, he said.
Watch | Marcellus Investment Managers’ Pramod Gubbi On His Expectations From Budget 2020