4.9% fiscal deficit expectation won’t change market mood: Killol Pandya, LIC Nomura MF

In an interview with ET Now, Killol Pandya, Senior Fund Manager-Debt, LIC Nomura Mutual Fund, shares his outlook on treasury. Excerpts:

ET Now: Finance ministry sources indicate that the FY13 fiscal deficit is seen at 4.9% versus the 5.2% budget aim. This would certainly be digested with a lot of optimism given the recent GDP number that we just saw.

Killol Pandya: Yes, it is welcome news definitely and probably we will serve to counter some of the pessimism that had crept into the markets after what the RBI governor told us yesterday. So yes it is perhaps to assure the markets that things are not as bad as the market might perceive it to be in the times to come. So yes it is a welcome number. The figure is quite encouraging as it stands, but a couple of perspectives do continue to stand. You were talking about sustainability on your show just now and that in fact is a key point. Things look not so bad right now, even the inflation numbers seems to be panning down as of now, but how long is this going to sustain that remains the mood point which is worrying the markets per se. However, while this number is welcome, it is not going to radically change the mood of the market. The market will continue to carry a wait and watch approach as we go along.

ET Now: While if this number is true, we do reach say maybe 4.9%. Does the market think about a better number for FY14 or because it is election year, because there could be a lot of unplanned expenditure as well that the 4.8 number stays or probably even continues to be in doubt?

Killol Pandya: In view of the fact that 2014 is going to be an election year, it is not lost on the market participants and as you correctly mentioned, it continues to weigh on us all. Much of the emergent numbers will probably depend on how the poll mathematics works out in terms of alliances and seats. Now that being unknown at this point in time, the markets continue to weigh in the worst and that is causing some amount of sluggishness in positivity of outlook. So yes, the sustainability of this number remains in doubt with a very strong bias towards negative.