The year 2019 could witness the national elections being fought on farmers’ issues as the government could be considering several measures to support farmers in distress, as pressures mount for a broad based farm loan waiver scheme ahead of the national elections. Doubling of collateral free loans under the Kisan Credit Card scheme to Rs 2 lakh and/or changes in the Pradhan Mantri Fasal Bima Yojana (crop insurance) scheme along with classification of agriculture bad loans are few of the measures being looked at by the government. Hence, the upcoming budget being presented next week is expected to have a strong rural and agriculture focus. The macro outlook for the country could also witness heightened volatility in 2019 on the back of increasing global headwinds and the upcoming elections. Moreover, there is also a strong possibility that the Central government may miss the fiscal deficit target for FY2019 on the back of higher budgetary spending, including a populist farm loan waiver spending measure. Next week will be quite interesting for market participants with the budget and RBI Policy expected to set the direction of the stock market for the month of February. The financial sector is a heavyweight and the most important industry in any economy across the world. In India, the financial sector comprises diversified entities such as commercial banks, cooperatives, mutual funds, non banking financial companies, pension funds, insurance companies and other smaller entities. With the sector undergoing rapid expansion, Government of India has introduced several reforms to liberalise, regulate and improve the financial health of the industry. Apart from other smaller financial entities, the banking regulator has recently allowed payment banks to operate in the sector. However, it would be pertinent to note that the financial sector is predominantly a banking sector, with commercial banks accounting for more than 60% of the total assets held by the financial system. The mutual fund industry has seen rapid tremendous growth in assets under management, with equity portfolios reaching their all time highs. Investors have contributed to this surge in collection by contributing their savings in equity mutual fund schemes through the systematic investment plan route. Another crucial component of the country’s financial sector is the insurance industry, which is expanding at an extremely fast pace, with collection of insurance premium of life insurance companies reaching nearly Rs 2 lakh crore during the last two years. In the financial sector space, the L&T Finance stock currently quoting at Rs 132 on the bourses looks as an attractive portfolio buy, with a target price of Rs 175 in the next one year.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.