What equity markets expect from the Finance Minister?

The Finance Minister and her team have been conducting hectic parleys with the various stakeholders on Union Budget expectations. Here is what the capital markets would broadly be expecting.
January 16, 2023

What Equity markets expect from the Finance Minister? 


The Finance Minister and her team have been conducting hectic parleys with the various stakeholders on Union Budget expectations. Here is what the capital markets would broadly be expecting.

Push to the reforms process

 Any capital market expectation starts off with the reforms process. Despite the upcoming state and general elections, the FM must sustain the reformist tone of the Union Budget. That means, focus must be on market-friendly reforms, on cutting down the fiscal deficit, reforms on the banking and financial sector front as well as greater reforms on boosting investments into India. Being the last full budget, the FM has to ensure that the focus on reforms is not lost.

Dividends and buybacks

This has been a contentious issue over the last few years. Now, dividends on equity shares as well as dividends on mutual funds are being taxed at the peak rate. This amounts to double taxes as dividends are a post-tax pay-out to the shareholders. One thing the Budget is considering is to shift the incidence of buyback taxation on the investor, which is a good move. However, in that case, the taxes on dividends must be also reduced to comparable levels. Budget 2023 is expected to take steps in this direction of making dividends more tax friendly to investors. The Budget can at least start off with equity mutual funds.

Addressing capital gains

At the outset, demands for scrapping of STT on equity transactions are largely out of sync with reality. It is generating nearly $3 billion for the government and is unlikely to go away. While the short term capital gains tax is acceptable, it is the flat LTCG of 10%, that is the main issue. According to government reports, the LTCG has not been contributing in a big way to the coffers. Also, the STT was introduced in lieu of LTCG, so there is no justification to bring back LTCG when STT still exists. Also, long term gains on MFs has a negative impact on financial planning and long term wealth creation through equity funds. That is something the budget must address, and, it is also very likely to address.

Make it worthwhile for FPIs

One major concern in the stock market in the last year and half has been the incessant FPI outflows. However, there are certain steps the government can take to stem these outflows. The FPI empanelment process can be simplified to a great extent to attract fresh FPIs into India. Secondly, the contentious issue of retrospective tax is still a major overhang for the FPIs. While specific issues like Vodafone have been resolved the issue is still open. Today, India has to compete with other EMs for global funds. The inclusion of Indian bonds in the global indices is pending. A move in that direction would certainly help!

Published At: Jan 16, 2023 02:24 pm
66
NSDL CAS Statement
Jun 27, 2024
How to download NSDL CAS Statement

Learn how to easily download your NSDL CAS Statement in PDF format with our step-by-step guide. Follow our instructions to log in to NSDL e-Services, download your account statement, and subscribe for

Read Full
CDSL CAS Statement
Jun 27, 2024
How to Download Your CDSL CAS Statement

Learn how to download your CDSL Consolidated Account Statement (CAS) with this easy step-by-step guide. Follow simple instructions to access your CDSL CAS statement online and keep track of your inves

Read Full
Image of a doctor reviewing financial documents for education loans
Jul 03, 2024
Understanding Education Loans: Pros, Cons, and Nuances for Doctors

Discover everything doctors in India need to know about education loans, including benefits, repayment options, and tips for studying abroad or locally. Understand the pros and cons to make informed f

Read Full
CAMS Statement
Jun 27, 2024
How to Download Your CAMS Statement for Mutual Funds

Learn how to download your CAMS Statement for mutual funds easily. Follow these steps for a detailed guide.

Read Full
Demat Depositary (DP)
Jun 27, 2024
How to Check if Your Demat Depositary (DP) is NSDL or CDSL?

Discover how to check if your Demat Depositary (DP) is NSDL or CDSL easily. Learn about NSDL and CDSL demat account numbers and find registered brokers.

Read Full
Sep 17, 2021
6 Financial Tips for New Parents

We understand that there would be a whole lot of things on your plate: Informing your family, picking a name, setting up doctor appointments.

Read Full
How Do Financial Advisors Generate Income?
Dec 05, 2023
What Are the Various Ways Financial Advisors Make Money?

Uncover the multiple strategies financial advisors employ to make a living. Educate yourself on the various methods financial advisors use to earn income by browsing our website.

Read Full
App

Want to get started ?