BackBudget 2024: A relaxation in capital gains taxes quite unlikely, says Aamar Deo Singh of Angel One
Aamar Deo Singh, Sr. Vice President, Research, Angel One, believes a reduction in capital gains taxes of any kind will be a very welcome step, given that overall taxation rates are higher in India, as compared to many other countries.
PremiumWith the first Budget of the Modi 3.0 government set to be released in the upcoming month, Aamar Deo Singh, Sr. Vice President, Research, Angel One, believes a reduction in capital gains taxes of any kind will be a very welcome step, given that overall taxation rates are higher in India, as compared to many other countries. However, he added that a relaxation or reduction in capital gains taxes is quite unlikely. Commenting on strategy for budget, he advises rebalancing only if one is extremely overweight in one or two sectors and underweight in other sectors.
Edited Excerpts:
What should retail investors expect from the upcoming Budget?
The upcoming first Budget of the Modi 3.0 government is expected in July, and as always, hopes run high amongst all, be it the investors, traders, corporations or the common citizens. The budget is likely to be focused on job creation, taming inflation, infrastructure development, incentives for the manufacturing sector, a major thrust for the agriculture sector, and most probably, taxation relaxation for certain sections of the taxpayers, primarily those in the lower income tax slabs, to provide more money in the hands, so as to further bolster spending. As far as retail investors are particularly concerned, a relaxation or reduction in charges is quite unlikely, but let’s keep a wait-and-watch policy.
Do you see the government tinkering with capital gains tax in any way?
Taxation plays a very important role when it comes to channelising funds into any asset class and tinkering with capital gains tax, that is, a reduction of any kind will be a very welcome step, given that overall taxation rates are higher in India, as compared to many other countries. So, yes, a reduction in the capital gains tax will be looked upon favourably by both domestic and international investors and could go a long way, in creating a more vibrant stock market, in years to come.
What new announcement do you expect from this Budget?
This budget could turn out to be one of the most important Budgets of recent times, because the government is saddled with the twin objectives of job creation and sustaining the growth of the Indian economy, despite the global headwinds emanating on account of the Russia-Ukraine war, Israel-Gaza conflict, higher energy prices, inflationary challenges, just to name a few. Also, all eyes will be on the government this time, as this will be the first time after a decade that it will be budgeted by a coalition government, though BJP still is in the command. So, that’s definitely keeping investors on their toes. However, reduction in taxation slabs, push for defence and infra, and incentives for MSME and agriculture, are a few areas that ideally will be on the radar of the government.
Which sectors will be the focus of the Budget? Will auto, banks see a push?
Most of the sectors including the likes of auto, banking, pharma, infra, defence, power and green energy, fintech & IT, agriculture & allied, are likely to be at the forefront of the budget expectations, as these sectors play a very critical role in the overall development of any economy. Hence, investors would have a keen eye as to what’s delivered in the Budget for these sectors, and also, with India’s GDP expected to grow anywhere between 7 and 8 percent per annum over the next decade, all these sectors shall witness a multiplier effect growth.
Do you see interest rates declining in 2023 with the CPI under control?
There is a very high probability that the RBI could be ahead of the curve this time than the US Fed when it comes to cutting interest rates. Inflation continues to be a downward trajectory, with the benchmark CPI cooling off to stay below the 5% mark, which bodes well for the future. It is also pertinent to ensure that the inflation stays sub 5% and the current monsoon continues on its normal path, as any disruption of the same could lead to a rethink by the RBI.
What are some headwinds that Indian markets have to battle in the second half of 2024?
The second half of 2024 is likely to be very eventful, given the fact that the US Presidential elections are scheduled for November, and it would have a major bearing, not only on the US markets but the global markets as well. So, this is one major event, that investors should keep a close watch on. Further, the current ongoing global conflicts till such time do not escalate, markets appear to have factored them well, but any change in the severity of the same could have a negative impact. Apart from these, energy prices, inflation trajectory & US Fed stance on rates, are a few other crucial data points that one needs to keep a sharp eye on.
How do you advise investors to rebalance their portfolios? What should they add/reduce?
Investors should always ensure that their overall portfolio is well diversified amongst various sectors, with stocks from the financials and banking, auto, infra, energy, pharma and IT, to name a few. Further, it is very pertinent to be evenly distributed and stick to the leaders of these sectors and those stocks, which are in no way, connected with any controversy or negative news, as that can have a significant bearing on the overall performance of the portfolio. So, a rebalancing is only suggested if one is extremely overweight in one or two sectors and underweight in other sectors. Striking a balance is essential, or to put it this way, depending upon the risk appetite, one can either look at mirroring the sectoral percentages as per Nifty, else look at investing in mutual funds or ETFs, where there is sufficient diversification.
What retail investor trends should one watch out for in the remainder of 2024?
Retail investors need to be alert and cautious going forward in the second half of 2024, as markets trade at record highs, and it becomes exceedingly difficult to identify stocks at decent valuations in the current market scenario. So it becomes very pertinent that retail investors keep it light as they proceed, and they should look at adding onto quality stocks only on decent corrections, and in all circumstances, stay from stocks which are just the flavour of the season and those stocks & companies which have not seen both sides of the markets, that is the bull and the bear market.
One piece of advice for new investors?
One piece of advice I would definitely like to give to new investors is that you must understand clearly the difference between investing and trading, and never mix the two. Just to give an analogy, if investing is like flying at 30,000 ft, trading is like flying just above the treetops. Trading requires a lot more focus and energy as compared to investing. Also, if you are looking at wealth creation, you need to have a minimum of 5-10 years investment horizon, and either focus on quality stocks in an SIP mode, else look at investing in mutual funds or ETFs. Just remember that Rome was not built in a day, similarly, wealth creation also does not happen overnight. You need to have patience, discipline and courage to act when required.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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