Suman Bannerjee, who is the co-founder and chief investment officer at hedge fund Hedonova, says the Union Budget 2022 will be focussed on growth, given the hits the economy has taken through the pandemic.
In an interaction with Moneycontrol, Bannerjee shares his expectation that the Budget will bring in more startup-friendly policies and special incentives for healthcare, education, agriculture and renewable sectors, especially those under the ‘Make in India’ umbrella. Excerpts from the views shared:
Will the budget focuses more on populist measures especially ahead of some state elections or do you think it will be a more growth-focused budget?
It will definitely be growth-focused budget given the hits the economy has taken before of the pandemic.
Will the government focus more on sectors that generate more employment or sectors that affected the most by pandemic?
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I expect the Budget 2022 to bring in more startup-friendly policies, relaxed taxation policies simplified GST returns, and special incentives for healthcare, education, agriculture and renewable sectors especially those under the ‘Make in India’ umbrella.
Further investment in creating innovation hubs in tier 2 and tier 3 cities to promote entrepreneurship is expected too and hence create job growth.
What could be a surprising element in Budget if any?
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Regulatory and tax changes for IFSCsA (International Financial Services Centres Authority) focus on ISFC/GIFT city norms and clarity on regulations there would invite more foreign capital into India. This is not expected but if it happens, it will attract a lot of foreign capital to India which is currently sitting on the sidelines.
How do you read corporate earnings announced so far for the December 2021 quarter?
Corporate earnings, especially in consumer goods and healthcare, have been strong. I think corporate profits will continue to grow given the high savings rate and domestic demand.
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After Budget, what are the other important events or factors to watch out for in the rest of 2022.
The single most important factor to look forward to is the Fed tapering. Higher interest rates in the US will attract back institutional capital out of emerging markets, leading to a few years of equity underperformance.
Do you expect the market to give double-digit return in 2022 and close the year above 21,000 on the Nifty50? Also in 2022, do you think the market will still be worried due to expected three rate hikes by Fed, inflation and COVID?
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The year 2022 will be a testing time for the Indian markets. Foreign capital going back to the US and flight to safety will lead to FIIs pulling money out.
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