Budget 2016: Expect action on monetary front by RBI, says Motilal Oswal

Budget 2016 was only a side show amid the bigger global events and its impact on the Indian equity markets will last not more than 24-hours, says Raamdeo Agarwal of Motilal Oswal.He is of the view that the government's intent was right but the triple tax on dividends has come as a big negative. Speaking to CNBC-TV18, Agrawal says the rate cut will not only be needed for fiscal prudence but also to recapitalize banks. He expects more actions on the monetary front from the Reserve Bank of India (RBI). Housing finance companies will benefit from the Budget through the impetus of low cost housing, he adds.Meanwhile, he says 1 percent infra cess on cars will not be a big dampener for auto companies.Below is the verbatim transcript of the interview.    Latha: Budget has come and gone, everything analysed you think it can't change the reality of the bear grip on the markets or the slowdown in the economy?A: What you said is right. This is maybe 48 hours Budget or 24 hours Budget. However the huge event is behind us, that itself is a big relief  and some of the draconian rumours which were around that long term capital gains tax will be, there were all kinds of rumours about long term capital gains tax, the rumour about service tax, nothing came. Actually the fiscal prudence or discipline is absolutely on the dot. So, those things were pretty good. The only thing I found big negative was the triple tax on dividend. Since we are coming from the market probably it is more intense for us than anybody else. The intent was right, they wanted to tax the super rich and splurge on the rural economy. So, to that extent it is fine but doing triple taxation on dividend, 33 percent at the corporate level,  20.5 percent at a DDT level and then further 11.5 percent now at individual level if you are getting more than Rs 10 lakh, I think this is not good. This is not good for minority shareholders because what will happen is that the management, who pays more than Rs 1 crore dividend? All the managements. Why will they increase the dividends, the promoters will not increase the dividend. If they don't increase the dividend minorities will not get only.  Latha: Mutual Funds won’t be impacted right?Agrawal: Mutual Funds won’t be impacted if the get the dividend.Anuj: Let us talk about the positives because clearly there is room for Reserve Bank of India (RBI) to act now and our sources believe that it could be as early as 24 to 36 hours now with the Finance Minister sticking to the fiscal path? Do you think this time the rate change or rate cut could be a game changer or like last time it actually mark the market speak. Is that still a risk for our market?Agrawal: It is not the risk but it an opportunity in the sense that now the rate cut is not only coming for fiscal prudence but also recapitalise the banks. This will be one of the major sources of capital for the public sector banks which are looking for capital from all possible sources. Clearly, there is a game plan with RBI and government. After giving Rs 25,000 crore RBI has to put a rest of it either from their own balance sheet or by reducing the rates and increasing the bond prices and profits on that.We are going to see some more action from the monetary front coming from the RBI.