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Budget 2016 Key Highlights

Government sticks to fiscal consolidation roadmap; retains FY17 fiscal deficit target of 3.5% of GDP compared 3.9% in FY16
Focus of the Budget � (i) Revival of rural demand and (ii) Public capex led investment cycle
Realistic growth assumption for gross tax revenues at 11.2% on the back of 11.5% Nominal GDP growth
Barring minor tweaks, key tax rates left largely unchanged barring

Budget 2016 Market Impact

Bond
Net g-sec supply of INR 4.25 trillion is lower than market expectation of INR 4.6 -4.8 trillion. The net supply of g-sec in FY17 will come at a 6-year low.
We continue to expect one round of 25 bps rate cut (on or before Apr-16)
We continue to expect 10Y g-sec yield to move towards 7.40% by end FY17

Rupee
Emphasis on fiscal consolidation is likely to boost sovereign credibility
We continue to expect INR in 67-69 range through FY17 with global risks providing some downside.