Finance Minister Arun Jaitley speaks with Prime Minister Narendra Modi (Photographer Kuni Takahashi/Bloomberg) 

Brokerages List Their Hits, Misses And Key Takeaways From Budget 2017

Union Budget 2017 allayed investors’ concerns on the taxation front, adhered to fiscal consolidation while keeping its focus intact on India’s poorest citizens as Prime Minister Narendra Modi seeks to garner support before crucial state elections.

That’s the consensus view of market experts on Modi’s pro-growth budget.

Addressing Parliament on Wednesday, Finance Minister Arun Jaitley ramped up rural spending, offered tax cuts and pledged higher infrastructure in the financial year starting April 1, 2017.

Most analysts expect the government’s policy initiatives to boost consumption after the demonetisation hiccup and ease interest rate cycle, which could bode well both for bonds and the rupee.

Here is what analysts had to say about the Union Budget 2017:


  • Hits: Fiscal deficit target, gross borrowings, focus on affordable housing and the rural economy
  • Misses: Allocation for bank recapitalisation, revenue growth assumptions a bit conservative
  • Rates/Forex Strategy: Expects front-end bonds to perform well while the longer end of the curve remains range-bound. Budget reforms positive for the rupee.
  • Policy Road Map: Expects a 25-basis-point rate cut on February 8
  • Key Takeaway: Government has chosen macro stability over growth, despite the pressure to present a populist budget
We see this budget as prudent and popular, but not populist. 
Nomura Report


  • Hits: Fiscal deficit target, plan to abolish the Foreign Investment Promotion Board, spending on rural infrastructure and the anti-corruption stance
  • Misses: Allocation for bank recapitalisation, new job creation program
  • Rates/Forex Strategy: Yields could push lower; Rupee may find some breathing room but external factors weigh
  • Policy Road Map: The room for rate easing is limited – 25-basis-point cut more likely in April than the February policy
  • Key Takeaway: Budget was expected to focus on rural, infrastructure and direct taxes in the near term and it came in line
  • Key Sectors Which Will Benefit: Consumption, LNG gas, cement and defence
The feared long-term capital gains taxes didn’t materialise – providing relief to investors.
Citi Report

Also Read: Government Sets Steep Rs 72,500 Crore Disinvestment Target

Goldman Sachs

  • Hits: Fiscal deficit outlook, revenue targets look credible, structural reforms
  • Key Takeaways: The government has maintained a balance between prioritizing capital spending and being fiscally prudent
  • Market Strategy: Lower-than-expected market borrowing will be somewhat positive for government bond yields
  • Policy Road Map: Expects a rate cut of 25 basis points rate in the February 8 policy
  • Key Sectors Which Benefit: Financials, industrials, consumer goods, utilities

Bank of America Merrill Lynch

  • Hits: Increased spending on rural and infrastructure, avoided large adverse taxation while clarifying taxation for foreign investors
  • Misses: Stayed away from expected fiscal push
  • Rates/Forex strategy: Yields could push lower; the rupee may find some breathing room but external factors weigh
  • Policy Road Map: Expects 25-basis-point cut in the February policy; average lending rates to be reduced by 50-75 basis points by September
  • Key Sectors Which Will Benefit: Autos, consumer, banks, cement
We grow more confident of our call that the Union Budget will support lower lending rates.
Bank of America Merrill Lynch Report      

Axis Capital

  • Hits: Fiscal deficit target, allocations to rural and infrastructure, less-cash political donations, removal of FIPB route for FDI
  • Misses: Financial sector recapitalisation not bumped up, bad bank, and corporate tax cut not applied broadly
  • Rates/Forex strategy: Bond markets to take heart from fall in borrowing and FRBM
  • Market Drivers: U.S. policy, Goods & Services Tax list, remonetisation
  • Key Sectors Which Will Benefit: : Banking, auto, realty, housing and consumer durables

ICICI Securities

  • Hits: Defies populism, fiscal consolidation, employment generation, direct tax provisions
  • Misses: Government marginally deviated from its fiscal path
  • Key Sectors Which Will Benefit: Autos, FMCG, banks, cement, capital goods
Union Budget 2017-18 is realistic, high on substance and has positively surprised the markets by defying expectations of populism amid demonetisation and impending state elections.
ICICI Securities Report

Edelweiss Broking

  • Hits: Fiscal prudence, boost to rural and infrastructure, tax reduction for individuals and smaller firms
  • Misses: Budget maintains a structural direction but has no big bang announcement
  • Key Takeaways: The government finances in conjunction with buoyant tax collections provided the much needed room for spending
  • Market Strategy: Bonds and rupee seen stable in the short term; bullish on equities over the medium term
  • Key Sectors Which Will Benefit: FMCG, railways, automobile, agriculture, cement

Kotak Institutional Equities

  • Hits: Fiscal consolidation on track, lower tax rates
  • Misses: No major stimulus
  • Key Takeaways: Budget compatible with the government’s medium-term objectives of economic growth, fiscal consolidation and improved governance.
  • Key Sectors Which Benefit: Autos, cement, consumer goods
We believe the market will receive the FY2018 Union Budget proposals positively in light of its focus on economic growth and reforms in the short term and fiscal consolidation in the medium term.
Kotak Institutional Equities Report

Motilal Oswal Securities

  • Hits: Fiscal prudence, measures to clamp down on black money, relief to the low-income individual taxpayers and reduced corporate tax for small companies
  • Misses: Divestment target looks ambitious, fiscal deficit target higher than the committed 3 percent target
  • Policy Road Map: Expects rate cut in the upcoming policy
  • Key Sectors Which Will Benefit: Autos, FMCG, banks, cement, oil & gas
2017-18 Union Budget extremely credible and high in quality, which is, delightfully, unaffected by upcoming state elections.
Motilal Oswal Securities Report


  • Hits: Fiscal prudence, focus on rural economy, more incentives for small firms and real estate sector
  • Misses: Budget maintains a structural direction but has no big-bang announcement
  • Market Strategy: Sees the 10-year benchmark yield to remain in a range of 6.30-6.60 percent for a significant period of time.
  • Policy Road Map: Expects a 25-basis-point rate cut on February 8

Nirmal Bang Securities

  • Hits: Fiscal prudence, no change in capital gains tax
  • Misses: No cut in corporate tax for large companies
  • Policy Road Map: Do not expect interest rates to fall materially from here
  • Key Sectors Which Benefit: Financials, infrastructure, automobile
  • Key Takeaway: Budget has sought to alleviate the pain felt by those who suffered directly and indirectly because of demonetisation -- the rural population
While we do not expect interest rates to fall materially from here, we believe the Budget will not contribute to any increase in rates in the next 12 months.
Nirmal Bang Securities Report

Also Read: A New Long-Term Capital Gains Tax Controversy That May Hurt ESOPs And IPO Shares

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