Budget 2020: Positive for consumers but near-term negative for financials, says Envision Capital's Shah

Nilesh Shah, MD & CEO of Envision Capital and Navneet Munot, CIO of SBI MF decoded the Union Budget 2020 and gave their outlook on the road ahead.

Shah said, “On the whole, this budget is good for the consumer space because you are going to have millions of middle class families with more disposable income especially if they opt for the new tax structure,” he said in an interview with CNBC-TV18.

However, the budget seems to be negative for financials in the near-term. “If you look at for banks - more insurance means more premium they would have to pay, which means more costs for them and even for mutual funds, life insurance companies it means directionally lower allocations from millions of families in the country,” Shah said.

“I am not sure whether companies would actually be incentivized to declare more dividends because we do not know what the fine print says on the buyback tax. If that anomaly does exist, and it makes more sense for companies to do buybacks, then my sense is that companies would actually go ahead and do more of buybacks, especially, the companies which are run by promoters and not the companies which are sponsored by MNCs,” said Shah.

Talking about taxes, Munot said, “We need a lot more financial savings coming into the market, not only to meet the large borrowing requirements of the Centre and the state government, but also to provide the risk appetite to the market. So, if you are doing away with 80C or 80L and those kind of deductions, they may not be very productive because in the simplification of taxes you have those brackets without deductions, but somewhere we need to incentivize financial savings. I think that is very critical.”