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Arun Jaitley's Budget speech suggested a sea change in the budgetary process, one that is professionalised and de-politicised. The Budget also seemed to suggest the government's willingness to listen to various stakeholders, rather than pushing through a pre-determined game plan.
This year's Budget lays a firm foundation for at least a four-year positive run for the economy and markets. The first major impact will be felt in FY17, when revenue growth will be visible on the normalised devolution to states..
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When it comes to stock markets, a key theme of the recent past was 'quality with growth'. Companies with high-quality businesses, run by high-quality management, and recording high-earnings growth delivered disproportionate stock returns. This theme should continue for some more time to come. With the lowering of tax rates, expect blue chips (i.e. full tax-paying companies with large profits) to become bluer.
Next, in the near term, all sectors related to housing should do well - select real estate companies, housing finance companies, and housing material companies (paints, cement, sanitary ware and plywood, among others). In the medium to longer term, expect domestic cyclicals and rate-sensitives to start looking up - mainly infrastructure/construction, capital goods, and non-banking financial companies.
Also, with public sector banks gaining the government's attention, we should expect significant profit and stock action there as well.
Stock markets are increasingly becoming multivariate and complex. Amidst all this, retail investors are best advised to participate through disciplined investment in high-performing mutual fund schemes.
Joint MD, Motilal Oswal Financial Services Ltd