Please find below the BUDGET REACTION [MARKETS] by -
Ms Deena Mehta, MD, Asit C Mehta Investment Interrmediates Ltd.
Kindly carry.
Thanks & Regards,
Anirudh & Varsha
Paradigm Shift PR
9892343828 / 9821195211
022 22813797 / 98
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*Budget 2009 Reaction *
Ms Deena Mehta, MD, Asit C Mehta Investment Interrmediates Ltd.
The technical correction seen in the market today has been viewed as a
negative reaction to the budget. The markets work on expectations, a big
event and expectations build up, the event is over and the reaction is not
in relation to the facts of the event but on whether the expectations were
met or not.
What did not happen? Direct tax rates did not go down for corporates, but
there was removal of Fringe Benefit Tax. Minimum Alternate tax was increased
from 10% to 15%, but tax holidays which were expiring next year have been
extended for one more year. Securities Transaction Tax (STT) was not
reduced. That was bad. The transaction costs in India continue to be one of
the highest in the world. Individual Tax payers did get a relief, in terms
of removal of Surcharge on income and increase in basic exemption levels.
Small traders now need not maintain books of account nor pay advance tax
they can just pay 8% of their income once a year at the time of filing their
returns.
Disinvestment was expected on a large scale. But the possibility is not
ruled out. If the government can increase price of petrol before budget, it
can also make changes in disinvestment policy before the budget is passed.
The government is talking of reducing fiscal deficit only next year, this
year it wants to continue with government spending to keep the growth
momentum. This government is going to remain for next 5 years, hence this is
not the last we have heard on disinvestment.
Several reliefs have been given to New Pension Scheme. This is a pension
scheme for people working in unorganized sector i.e. persons who do not save
in provident and pension fund. These pension finds investments will not be
subject to any tax on trading profits, their will be no STT and no tax on
distribution of dividends. These sops make the investment in new pension
scheme superior to investment in mutual funds. This is a very good long term
move for the markets since pension funds will be find investments in stock
markets very attractive.
What does an investor do in such circumstances? Will the markets worsen? Is
it a good time to buy? The government is committed to reforms and several
ministries are talking about 100 day reforms program. Hence lots of positive
announcements are expected from the government. The market is technically
weak so say the chartist, wait. But I would advise that at least 50% of the
investments you want to make should be made. Look at individual value pick
rather then the index. The budget predicts increase in corporate earnings,
hence on a 6 -12 month your investments should give a positive yield curve.
Happy investing!
END.
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