While in a conversation with Jinsy Mathew, Choksey explains why two percent excise duty cut given to the capital goods sector by the Finance Minister in the interim budget won't bring much cheer to the sector. Following is the complete transcript:
What is your initial reaction to the Interim Budget?
Interim budget was largely in line with market expectation except changes in excise duty. We think 4.1% fiscal deficit target for FY15 looks aggresive given the state of the tax collection, weak divestments and rising subsidy bill. For market, budget would not give any direction meaningfully in our view.
Between today and the next budget which will be tabled by the new government post elections, at what levels do you see the benchmark Nifty ?
What could be the near-to-medium term impact on capital goods stocks following the excise duty cut?
We dont see any major impact of cut in excise duty in capital goods; as 2% cut in duty would not have impact on investment decision for a corporate. Excise duty is passed to the customers.
What is your initial reaction to the Interim Budget?
Interim budget was largely in line with market expectation except changes in excise duty. We think 4.1% fiscal deficit target for FY15 looks aggresive given the state of the tax collection, weak divestments and rising subsidy bill. For market, budget would not give any direction meaningfully in our view.
Between today and the next budget which will be tabled by the new government post elections, at what levels do you see the benchmark Nifty ?
The Nifty has been rangebound for some time now and trading in the 5950-6150 range. And I think that without any reforms announced in the Interim Budget for the capital markets the Nifty should continue to trade in this range.
Auto sector has welcomed the cut in excise duty. Do you see this cheer continuing in the near term?
Well the auto sector has been facing a demand problem from the past 3 quarters due to high interest cost, increaseing fuel prices, etc which increases the overall operational cost of the vehicle. With the cut in excise duty which will ultimately be passed on to the consumers, some demand can be expected to return back to the auto sector. In the near term we expect that auto companies to benefit atleast on the volume front.
Auto sector has welcomed the cut in excise duty. Do you see this cheer continuing in the near term?
Well the auto sector has been facing a demand problem from the past 3 quarters due to high interest cost, increaseing fuel prices, etc which increases the overall operational cost of the vehicle. With the cut in excise duty which will ultimately be passed on to the consumers, some demand can be expected to return back to the auto sector. In the near term we expect that auto companies to benefit atleast on the volume front.
What could be the near-to-medium term impact on capital goods stocks following the excise duty cut?
We dont see any major impact of cut in excise duty in capital goods; as 2% cut in duty would not have impact on investment decision for a corporate. Excise duty is passed to the customers.
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