Vinod Nair of Geojit Financial Services says Budget, RBI policy gave strong support to market; Coronavirus a short-term loss

Rs 103 lakh crore infrastructure plan and the proposal to double farmers' income are also positive but more fiscal support and efficiency will be required.

The key positive of the budget is that the Government wants to reduce its role in businesses and focus on governance. The divestment plan of Rs 2.1 lakh crore compared to only Rs 0.18 lakh crore till date proves the strong intention of the government.

The customs duty has been increased to many import products, which is also positive for 'Make in India' initiative. Debt borrowing plans have been moderated, which will provide support to the bond market; interest yield can reduce in the medium to long-term. Also, very encouraging measures have been provided for aquaculture (fisheries).

The measures are very encouraging to spur credit in the economy by supporting stressed sectors. The cut in CRR to important sectors like retail, automobiles, housing and MSMEs and open market operations of Rs 1 lakh crore are huge positives to flow more credits at lower interest rates.

The commercial banks will not have to provide CRR to RBI for 6  months between January to July 2020. Also, banks will not have to consider an on-going real estate project as NPAs for a period of one year. These will reduce the cost of funds to banks, increase liquidity and reduction in NPA level.

Overall Q3 results were good and largely in-line with the expectation with decent growth in earnings. In spite of the good numbers, a setback was higher slippages, concerning that the quality of asset has not improved as expected and this situation is likely to continue in the short-term. But given the new measures announced by the RBI  and IBC, we feel decent improvement in the NPA level in the coming quarters.

The other setback was poor numbers by auto, IT and pharma sector, while others like FMCG, oil & gas and cement are marginally better than forecasted.

Though the risk of infection is high for corona compared to other respiratory syndromes, it seems that fatality risk is low as per the available data being at 2 percent compared to 10 percent for SARS and 34 percent for MERS.

It is also expected that this epidemic will put-down as the climate temperature rises in the summer season (June). There is also some news that work in China has started to open from standstill last week. We feel that this will be a short-term loss to the economy given high contamination. The world GDP growth can fall by 0.4 percent if this situation continues as per IHS Markit.

At the same time, it could be a blessing in disguise to emerging countries like India to develop as an investment destination in the long-term as the world adopts diversification to reduce its sourcing risk.

We should invest more in equity either through direct or mutual funds when the economic crisis is short-term in nature.

We feel that the corona problem is more a temporary blip and we should specifically increase exposure in the sectors which are likely to benefit from the losses burdened to China’s economy.

Generally, equities will cherish in the long-term. Some such sectors are chemical, textile and oil marketing companies which will benefit from improvement in international prices in the short-term and business outlook improves in the long-term as the world will consider reducing risk by diversification of sourcing. But quality names have to be maintained focusing on the management, products, leadership and business model.

We expect equity to be in a positive trend and allocate higher weightage as per your risk-averse appetite.

An investor can invest about 70 percent in equity to as low 25 percent depending on the risk averseness.