The agriculture theme is likely to hog the limelight in 2019 as well, suggest experts. The focus will continue to be on boosting the rural economy, employment generation and increasing agriculture income
The big event — interim Budget — is just around the corner and the good news is that market is not nervous ahead of it. In fact, it is consolidating in a narrow range which is a positive sign for the bulls as any good news could result in short covering which could push the index above 11,000.
Let's look at the market performance in the last five years, that is during the period when Modi government was in power. A snapshot of returns since Budget 2014 (the first one presented by the Modi government) shows that small & midcap stocks in the consumption, and agri space created tremendous wealth for investors.
The agriculture theme is likely to hog the limelight in 2019 as well, suggest experts. The focus will continue to be on boosting the rural economy, employment generation and increasing agriculture income.
As many as 179 stocks in the BSE-500 index rose 100-1,400 percent since July 10, 2014. The list includes Indiabulls Ventures, HEG, Bajaj Finance, Avanti Feeds, Aarti Industries, Phillips Carbon Black, Tata Metaliks and Graphite India.
Here is a list of 30 stocks from the list of 179 which more than doubled investor wealth in last 5 years:
The Finance minister Arun Jaitley will be presenting the interim Budget, the last one before the upcoming elections, on February 1. Traditionally, incumbent governments generally do not announce major reforms that could potentially burden the next government but investors are eyeing some big announcements.
Jaitley, on January 17, said the government could break with convention and make the February 1 exercise more significant than a vote on account.
Will there be any good news for investors?
In recent times, the investor community has become quite large.
Financial savings as a percentage of total savings is closer to all-time highs and market participation has increased markedly. So, helping the investor community could be a key agenda for the government, suggest experts.
“Buoyant markets typically help the economy and definitely keep the mood upbeat for elections. While considering the recent challenges that the ruling party has faced with farmer distress any major cheer for the investor community seems unlikely but it cannot be ruled out altogether,” Naveen Kulkarni, Head of Research, Reliance Securities told Moneycontrol.
“Cuts in STT or changing the capital gains regime are likely to cheer the investor community without much impact on the government’s finances,” he said.Here’s what other experts are expecting from the Interim Budget 2019:
Removal of STT for delivery trade:
Analyst: AKPrabhakar, Head -Research at IDBI Capital:
It is the election year so more benefits to the rural and lower tax payer is my expectation. Removal of STT for delivery trade or reduction in corporate tax or abolition of dividend distribution tax can cheer market all three would be best to happen.
Farm loan waiver, relaxation in income tax
Analyst: Nikhil, Co-Founder, Zerodha
With elections around the anvil, we expect this budget to largely be populist. Things like farm loan waiver, relaxation in income tax slabs, etc. could play centerstage.
A rationalization or removal of STT has been on the list for many years now, and this is one change which could deeply benefit market participants across the board. A significant populous participating in the financial markets in India look to make a living by taking advantage of short term price discrepancies, they are burdened by this tax.
In many cases, STT is making it impossible for small traders to remain profitable over the long term. Removing STT will go a long way in making markets deeper and more efficient, and allow a whole host of market participants to thrive creating a robust, market flush with liquidity which will attract further investments.
More funds to be eligible for tax deductions under Section 80C
Analyst: Anugrah Shrivastava, Co-founder & Head of Investment Products, smallcase Technologies
ELSS funds shouldn’t be the only mutual funds that are eligible for tax deductions under Section 80C. Investments made in large-cap ETFs should also be allowed to save tax under this Rs 1.5 lakh umbrella.
Passive investing instruments like ETFs have numerous advantages over actively-managed equity funds like ELSS funds. The considerably lower expense ratio is a major benefit that will allow investors to pay less in fees while saving on income tax.
Moreover, recent data has shown that passive instruments like ETFs have beaten actively-managed equity funds. The latter has struggled to generate alpha in volatile markets. If we look at the average 1-year and 3-year returns of the ELSS category ( -8.18% and 11.34%) and compare it to the Nifty (1.73% and 12.46%), we see that passive investing has beaten active investing.
Deduction under 80C could be doubled
Analyst: Abhijit Bhave, CEO of Karvy Private Wealth
The deduction under section 80(C) may also get doubled from the present limit or higher limits may be ascribed. Higher medical expenses deductions and schemes specifically for the senior citizens for giving assured income may be introduced.
There is an outside chance of scrapping of the securities transaction tax (STT), which along with a possible single GST rate of around 15% in the entire country would give a fillip to the equity market.
Another change that may be brought to ensure taxation parity between mutual funds and schemes of Insurance, by levying taxation on the policies like unit-linked plans (ULIPs).
The Ayushman Bharat health insurance scheme may be given more teeth as the incumbent government is highly focussed on healthcare and making available of better medical facilities for the entire population of India.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.