Budget 2024-25 : From divestment in low float PSUs to revisiting safe harbour clause under Sec 9A-- what market participants asked FM

Budget 2024: Capital market participants urge FM to divest some stake in low float PSU stocks

Capital market participants on June 20, in New Delhi, suggested a bevy of market-related measures to Union Finance Minister Nirmala Sitharaman ahead of first Union Budget of Narendra Modi 3.0 government.

One of the industry's suggestion is to divest some stake in low float PSU stocks as they are seeing valuation bubble in at least some cases, a source told Moneycontrol.

In the past few months, PSU stocks have been witnessing a massive rally, including the low float ones, thus leading to valuation concerns.

Market participants also asked FM to revisit safe harbour clause under Section 9A of Income Tax act that prevents offshore funds from coming to India, the source said.

A ‘safe harbour’ regime, via Section 9A, was introduced in the Income Tax Act in 2015 to encourage the fund management activities of offshore funds from India.

Mutual fund managers have sought tweaks in regulatory framework so they can launch pension schemes as they are looking to expand their product offerings, reported CNBC-TV18.

The source said FM was urged to boost consumption in rural areas, maintain capex and infrastructure spending, additional thrust to GIFT City. They also wanted the FM to revisit the commodity service tax and GST on NBFCs' co-lending.

Union Minister for Finance & Corporate Affairs Smt. @nsitharaman chairs the second Pre-Budget Consultation with leading experts of the financial and capital markets sector in connection with the forthcoming General Budget 2024-25 in New Delhi, today.

The #PreBudget consultation… pic.twitter.com/brDpwFGC80

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— Ministry of Finance (@FinMinIndia) June 20, 2024

Nilesh Shah, MD- Kotak Mahindra AMC, who was among those who met Sitharaman for the pre-Budget discussion on the country's financial sector and capital markets said she was asked to create a financial inclusion programme.

"I shared with the Finance Minister that under the aegis of our regulator SEBI, mutual funds have spread financial awareness. We have enlisted more than 4 crore indiians to participate in the journey of Viksit Bharat and secure their financial freedom. We need to reach out to far more Indians now to secure their financial freedom.

"We requested FM to launch a Jan Nivesh campaign to create financial inclusion for crores of Indians who are stuck in Ponzi schemes and speculations. Let Indians become financially independent by participating in the journey of Viksit Bharat," said Shah.

Capital market participants have also suggested increasing Securities Transaction Tax on algo-based hedge funds conducting High-Frequency Trading (HFT), among steps to shield retail investors from potentially heavy losses in Futures & Options trading, reported CNBC-TV18.

The suggestions included levy of a higher STT on investors with F&O turnover above Rs 1,000 crore, the report said, adding that this is to ring fence retail traders from excessive F&O speculation and losses.