InvestorQ : What are the capital markets expecting from the Union Budget 2020 on macro reforms and on encouraging FII flows?
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What are the capital markets expecting from the Union Budget 2020 on macro reforms and on encouraging FII flows?

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1 year ago
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With the economic slowdown, all eyes are on Nirmala Sitharaman for the focus of the Budget 2020. The focus of attention is back on the capital markets in general and the equity markets in particular. Equity markets are built on hope and hence the hope is always for a market friendly budget. Specifically, markets will look for two specific things.

Firstly, the markets need a strong push ahead with reforms. Nothing excites markets as much as a government committed to reforms. One of the reasons, the Nifty and Sensex had celebrated the return of the NDA was the continuation of the reforms process. However, economic challenges appear to have slowed down the reform thrust. The government must use the budget to give a clear and unambiguous signal that the reforms process is on track and the government is fully committed to the reforms process.

Secondly, the markets need a better narrative for FPIs that continue to dominate the Indian investment landscape. Indian markets are still largely dependent on the buying patterns of foreign investors. With growth rates falling and geopolitical risk rising, there is a risk-off tendency among the FPI community. The government must move quickly on giving the FPIs comfort on retrospective taxation and on major pending cases like Cairn and Vodafone. Also, the budget must refrain from proposals like higher public holding or higher taxes on FPIs which don’t go down well with the investor community.

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