Expect to see some changes in tax slabs in Budget 2015: Kaustubh Pawaskar, Sharekhan

In a chat with ET Now, Kaustubh Pawaskar, FMCG analyst, Sharekhan, talks about his expectations from the Budget. Excerpts:

ET Now: Tell us about your expectations from the Budget 2015. Are you looking out for any big reform in the consumer sector?

Kaustabh Pawaskar: I am not expecting big reforms. I would be looking at the budget more from the consumer-specific perspective. I will watch out for whether or not there will be some kind of tax relief for consumers, or for industries demanding release of the MAT rates.

This is what I am expecting from the budget. I have no big-bang expectations.

ET Now: Are you looking at personal income slab changes? That's something which will leave consumers with higher disposable incomes, and thereby lead to higher income for the FMCG sector. What is your view on this?

Kaustabh Pawaskar: The expectation is that we might see some changes in the tax slabs.

Sentiments have improved of late, but that is not getting converted into higher spending. So, some kind of positive moves in the budget might lead to favourable changes in the consumer environment. It may also lead to some changes in the demand environment as well.

Everybody is hoping that some kind of news could come in the budget, which might further boost the sentiment.

ET Now: Do you expect a tightening of norms for the tobacco/cigarette companies?

Kaustabh Pawaskar: Regulatory concerns are obviously there. In the last two budgets, excise duty on cigarette has been increased in the range of 18% to 20%. If we see such excise duty raises by 18-20% this year too, it will definitely impact cigarette sales volumes.

Companies will pass the raise on to the consumers. So, we might see further price increases. That would lead to further pressure on the cigarette sales volume.

This government has been clearly inclined towards reducing cigarette consumption or tobacco product consumption. Therefore, one should expect excise duty hike on cigarettes in the Budget 2015 as well.

ET Now: What are your top picks in this sector?

Kaustabh Pawaskar: If we consider overall earnings in Q3 as well as future growth prospects, we tend to like companies focused on urban discretionary spends rather than the consumer companies.

Keeping that in view, our top picks in the sector are Marico and Zydus Wellness. In urban discretionary or travel services, we have Cox & Kings and Thomas Cook as our top picks.