Budget-wary investors make a short call on the FM

By | February 27, 2015


There is an old saying that if wishes were horses, beggars would ride. While it may still take some time for beggars to ride, there is no dearth of wishes by the Indian taxpayer today for a plethora of reforms to make their way out of Arun Jaitley’s Budget briefcase this year. Like other retail investors, Naveen, a first-time investor is a happy man today as he ventured into the stock markets just in time to ride the Bull Run induced by the introduction of the Modi government last year.

Naveen was divided on choosing between real estate, gold and stock market as possible investment options but the farsightedness of reforms by Prime Minister Narendra Modi and his team made Naveen pick the financial markets as his investment vehicle. Now with Nifty and Sensex likely to breach their all-time highs of 9,000 and 30,000 levels respectively just as Finance Minister Arun Jaitley presents his first full budget this year, expectations from Naveen and his friends are sky high.

Change in Both Long Term and Short Term Capital Gains Tax: It has been long since there has been an active overhaul of tax liability for investors. Tax reduction is one of the perennial hopes almost every retail investor would be nursing. Specifically, the average retail investor would be hopeful of a relaxed tax structure both for short term as well as long term capital gains, especially for investments made in equity and debt instruments.

Increasing the Limit under Section 80C: Although the Finance Minister did try and offer some relief to the common man and the retail investor in the earlier revision by increasing the deduction limit under section 80C to Rs. 1.5 Lakhs from earlier levels of Rs. 1 Lakh, retail investors are seeking a much higher exemption limit. With a booming stock market which new retail investors are making a beeline to by investing in financial markets, section 80C must offer benefits to increasing categories of mutual funds. Unlike seasoned investors, majority of retail investors take the mutual fund route to income generation in the financial markets.

Disinvestment of PSUs: The Indian retail investor has had a bitter-sweet year. While the Nifty and BSE Sensex made record gains, there have been cyclic falls which have left the investor confused. Analysts and investors believe that while mid-cap and small-cap sectors are likely to offer a higher growth perspective as the government is seen as pushing for industrial reforms, a clear policy of disinvestment is needed. Unlike the last NDA government which had a clear disinvestment policy, the current government is yet to take a call on the projected way ahead. PSU disinvestment can bring in much-needed liquidity in the markets allowing for a long-term Bull Run cycle, auguring well for the retail investor.

Financial reforms to Increase Investment Friendly Atmosphere: Even though the government has been seen as pro-reform, there is still a lot of distance to be covered as far as financial reforms go. Retail investors are hoping that the Finance Minister would usher in a clear roadmap for various industry sectors in the Annual Budget, allowing the financial markets to maintain an even cyclical growth across all sectors. Unlike in the past where certain sectors have been sluggish while others have been bullish, investors are hoping that an even growth cycle would help even the small-time investors like Naveen who, by investing in mutual funds SIP plans, is betting on numerous industries to do well in order to book capital gains.

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