Manishi Raychaudhuri of BNP Paribas discussed fundamentals of the market as well as shared his views and outlook on union budget 2020.

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“Budget 2020 was a bit disappointing. We were expecting much stronger degree of attempts at growth stimulation. Even the personal income tax cuts that the finance minister (FM) talked about they would be more than neutralised by the fact that to opt for them some would have to give up pretty much all the exemptions. So the person may actually end up paying more," said Raychaudhuri in an interview with CNBC-TV18.

According to him, the encouraging part of the budget was the incentives given to start-ups in the form of tax breaks on ESOPs. Also the incentive to sovereign wealth funds on infrastructure investments till March 2024 and the increase of 18 percent on capital expenditure - these were the three main points in the budget that were positive.

"At the same time, we think the dividend distribution tax (DDT) passed on to recipients would have an impact on the disposable incomes of the higher income bracket. All in all, the budget was a bit underwhelming, which is reflected in the market reaction,” he said.

The government had taken many steps previously and the most important one being the corporate tax cut, which came outside the budget. So, while the budget is just one step, economic reforms are a continuous ongoing process, he said. However, at the same time, I think the budget was an opportunity for the government to make a strong statement as far as longer-term economic policy is concerned. Going forward, one would expect pretty much - what we have seen of late – more of the same to continue,” he added.

“We would basically look forward to implementation of the steps that have been talked about and in particular, would look at that disinvestment number. It is a very tall promise that the government has made in this budget. That is the key number to be focused on going forward,” said Raychaudhuri adding that is a pretty significant aggressive target that the government has fixed for itself. If it does come through, I would be happy but at the outset looking at the numbers, we are a bit sceptical.

With regards to markets, he said, “The spread of the coronavirus is far more rapid than we had seen during the Severe Acute Respiratory Syndrome (SARS) episode. We have had data from the World Health Organisation (WHO) and we know that in about 6-8 months of the SARS episode in 2002-2003 we had about 8,000 cases. Now in just a couple of months we have around 15,000-17,000 cases."

However, the silver lining is that the present coronavirus is much less fatal than SARS - it was a 10 percent fatality rate at that point of time, this time around it seems to be about 2 percent.

"We think that the economic and market impact just like during SARS would be relatively short-lived. It can last for about one-two quarters, we have seen a pretty significant downside particularly to the north-Asian markets and we also think that this would have an economic rub-off particularly in north-Asia and particularly in greater China. However, just like the SARS episode, where we had about one to one and a half quarters of downside and then a pretty rapid recovery from April to July of 2003, we would expect this particular episode to be similar," he said. Therefore, investors should brace for pretty sharp impact on economy and the markets but at the same time it could be short-lived. So long-term investors who are in this for about 2-3 years or longer should see that claw back or markets moving up eventually.

Sector specific, he said, “At this point in time I would still be relying on Indian private sector banks, on Indian insurance companies. I would also look at Indian tech, some of the Indian oil and gas companies - particularly the gas sector. Even some of the auto, some select consumer staples companies are looking interesting at this point of time."

In terms of targets on Sensex, he said, “For the Sensex, we have a target of 44,500 by the end of this year, 2020. That is sometime away and we would expect the impact of the coronavirus spread or concerns surrounding it to die down, to subside by that time. We are not making any change to our targets for now.”