R Venkatraman: India’s bull story is intact, hold on to your equity positions

Given the tone of the statements made in railway budget and economic survey, Jaitley’s budget was on predictable lines. He carried forward the message that the economy was facing a rough patch and there are no quick fixes. The focus is on economic revival, creating employment, controlling inflation, without losing sight of fiscal and current account deficit. Setting up of expenditure man­agement com­­m­­­ission means he is serious about meeting his deficit target of 3.6 per cent in FY16 and 3 per cent in FY17.

The big positive is the changing mindset of tax payers. The setting up of multiple advisory benches for seeking advance notifications, setting up of high level committee to interact with trade and industry and simplification of transfer pricing laws are steps in the right direction.

Needless to say, resisting the temptation to increase tax rates is also a big positive. This also reiterates the commitment of NDA to a stable and predictive tax regime. Even on the contentious issue of retrospective tax, Jaitley made the right noises. He has also promised legislative action during the course of the current year to introduce GST. The FM has given due recognition of importance of capital markets and role of foreign capital in domestic capacity creation. On expected lines, cumulative foreign shareholding in insurance and defence has been to 49 per cent.

In order to kickstart the economy, multiple sops including budgetary allocation were given to infrastructure companies. The focus on infrastructure and manufacturing sectors is needed because these sectors can generate mass employment. What is even more encouraging is investment allowance of 15 per cent to SMEs who undertake expenditure of Rs 25 crore in plant and machinery. This segment is vital for the economy and focus on it is a big positive as they help in creating jobs and keeping the economy vibrant. Rationalisation of inverted duty structure where duty on inputs was more than finished goods has also taken place, which will boost domestic manufacturing.

For individual taxpayers, increase in exemption limit to Rs 2.5 lakh, increase in Sec 80 CC to Rs 1.5 lakh, increase in PPF to Rs 1.5 lakh and increase in deduction limit on account of interest on loan for self occupied house property from Rs 1.5 lakh to Rs 2 lakh are positives. This will help in channelising savings into productive financial instruments.

Our message to investors is that the long term Indian bull story is intact. This budget held no rude shocks. Continue holding on to your equity positions and if you do not have equity positions, then build it now.

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