High policy risks and uncertainty in 2017: Credit Suisse

The next 12-15 months are likely to see uncertainty for the markets on account of continued policies by the government against black money as well significant global events, Credit Suisse said today.

Accordingly, the Swiss brokerage said the investment outlook looks weak going forward.

"There continue to be significant policy risk and uncertainty both locally, where the government may continue with administrative measures against black money, and globally, with new government and important elections scheduled in 2017," Credit Suisse managing director (equity research) Neelkanth Mishra told reporters here.

Noting that demonetisation exercise was by far the most radical step by government to curb black money, Mishra said, "Now that nearly all the cancelled notes have been deposited contrary to the government's earlier expectation, it is likely that the government continues its fight against black money (this is could be through changes in the budget or continuing administrative measure)."
 

Mishra also noted that Goods and Services Tax (GST), which is expected now to be rolled out sometime mid-year, would serve as a disruptive factor for the economy for the few quarters at least before its benefits start to show.

"GST is also likely to be disruptive - positively for some industries and enterprises and negatively for some others," Mishra said, adding that its was unclear about the GST rate allocation among items.

Significantly, Mishra observed that real estate sector, which accounts for 13 per cent of the GDP and is the most affected from the recent demonetisation move, would be a major factor for slowdown in the economy.

"Slow real estate construction is likely to hurt demand for labour, cement, steel, home improvement and even impact discretionary demand (as nearly 95 per cent of household wealth is in land and realty)," he said.

However, Mishra noted that cheaper real estate, GST, demonetisation, higher digitisation and shift of various unorganised sectors to organised should help the economy in the medium-term.