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Samir Arora, Founder and Fund Manager at Helios Capital, says he remains positive on India but the lack of financial incentives for housing and no plans to capitalise public sector banks came as a disappointment. (Twitter: @iamsamirarora) "The real issue with the Budget is that it does not change the sectors markets like and currently dislike," he tells Puneet Wadhwa. Edited excerpts:
What are the key positives and the negatives of the Budget?
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Definition of "Big Bang" can be different for different people but definitely the intent was Big Bang. Now the question will become one of implementation. We were already positive on India and there was nothing in the Budget to change the view too much.
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What have been the big misses or disappointments?
On the margin, we have been disappointed on the lack of any incentives for housing sector and no clear plans on how to capitalise state-owned banks.
Has the Budget done enough to encourage 'Make in India'?
It is difficult for me to say whether foreign direct investors will find it attractive enough to "Make in India". Over the next few weeks, we will be talking to corporate investors to understand this well ourselves. However, it did seem that the government is trying hard to sort out various issues that cause friction.
Is the emphasis on social sector and the allocations worrying you?
No one should have an issue with allocations that are targeted properly and if the allocations reach the target population.
Has the Budget done enough for the foreign investors (FIIs) and long funds to look at India as an investment destination?
Allowing foreign Investments in Alternative Investment Funds (AIFs) is irrelevant and will not result in even one dollar flowing into such funds. This is because it was always easy to structure a fund offshore anyway - so why should FIIs buy into taxable funds in India?
How do you read the targets for maintaining fiscal discipline, subsidies and the higher disinvestment targets? Do you think these proposals are too ambitious?
I was always in the camp that 4.1 per cent fiscal deficit target was too tight and the new government should not have accepted it in the July Budget. Now the fiscal deficit number is very robust. Reaching the three per cent target one year later is not material as the confidence in the road map is higher now.
Divestment targets are reasonable, for I assume that Specified Undertaking of the Unit Trust of India (SUUTI) shares can be sold very easily if needed.
Do you think the Reserve Bank of India will now cut rates, and how soon? What is the quantum of rate cut you expect over the next few quarters?
We do not think that the RBI will cut rates immediately. Whatever one says, the market was expecting a fiscal deficit of 3.6 to 3.7 per cent. Therefore at 3.9 per cent, the RBI will not be pro-active.
There have been proposals relating to deferment of the General Anti Avoidance Rule (GAAR) and a cut in corporate tax rates to 25 per cent over four years. What is your reaction?
Postponement of GAAR was absolutely essential and therefore that is a big relief. It should have been scrapped. On the other hand, cutting corporate tax to 25 per cent is long-term positive but no real impact in the short-term for the cuts will start from next year.
In terms of sectors, you have been preferring the banking names. Will you look at allocating more to the sector given the likely improvement in growth as the Economic Survey predicts?
We like private sector banks and will continue to own them. It would have been difficult for a Budget to change their relative attractiveness.
Which other sectors would you now look to add to your portfolio? Which ones could see a lesser allocation over the next 12 months?
The real issue with the Budget is that it does not change the sectors markets like and currently dislike. There will not be any broadening of the sectors doing well and sectors like PSU (public sector) banks, Infrastructure and capital goods and real estate will continue to be ignored.
