The government is not looking aggressive enough and giving “some interesting ideas that we can hope for in the next few weeks”, Samir Arora, Founder and Fund Manager at Helios Capital, has told CNBC-TV18.
Arora said the government after going for the corporate tax rate cut should expand the tax cuts “maybe for consumers, stock markets. In fact, the government is not looking aggressive enough, in fact they have to put that bad patch out".
After the government reduced the corporate tax on September 20, the Sensex has rallied 13 percent and hit a record high followed by consolidation.
The consolidation, with no big correction, indicates that the market could be waiting for more announcements from the government.
In fact, the Reserve Bank of India on December 5 surprised the street by not cutting the repo rate. The market initially fell but recovered to end marginally lower, which could be mean that it is still hopeful of a rate cut, especially after the RBI said it would wait for more data points and budget before going for further cuts.
"Yesterday, the RBI said we are looking for the budget. What are they looking (for) in the Budget, if you think there is fiscal expansion, then the RBI will not do anything more or the RBI says to the government that you will expand and then I will do. It is a crisis time. Yesterday, RBI governor said we can't cut rate in every meeting that means the RBI will wait for three more months for budget and then they will act. We can't do that," Arora said.
If the government does not expand, then the market will fall."The slowdown is so deep and we are not taking action," he said.
He, however, was hopeful about tax cuts to boost consumption.
Talking about the recent tax cut and telecom price hike, Arora said, "Now, we have had telecom price hike, which would take around $6-7 billion from hands of consumers. I don't think tax rate cuts would be $20 billion, in fact the government would have said around $10-12 billion, which will keep all of us excited. That 60-70 percent of its gone not to save telecom companies, they have effectively gone as tax back to the government because this money will be used to pay adjusted gross revenue (AGR) dues or to compensate for that. If the AGR dues have not been there, then it would have been a normal thing."
In a recent report, Kotak Institutional Equities said the Indian mobile industry would consolidate further if the government does not offer a material relief on AGR liabilities, regulatory levies and potentially a floor on pricing. A 'no material relief' scenario would be an industry-structure-altering one, it added.
The telecom industry has been hemorrhaging, with combined losses of listed mobile firms surpassing Rs 1 lakh crore in the September quarter.
In November, India's two leading telecom operators Vodafone Idea and Bharti Airtel reported a combined loss of Rs 74,000 crore for the second quarter ended September, mainly on account of statutory dues arising from the Supreme Court order on AGR.
The apex court has upheld the government's position on including revenue from non-telecommunication businesses in calculating the annual AGR, a share of which has to be paid as licence and spectrum fee. The ruling over statutory liabilities has triggered a rush for provisioning by telecom companies.
Airtel, Vodafone Idea and other operators have to pay the government Rs 1.4 lakh crore following the Supreme Court order that has sent shock waves in an industry grappling with losses and billions of dollars in debt.
According to the latest estimates by the telecom department, Bharti Airtel faces a liability of around Rs 62,187 crore (including share of Tata Group of companies and Telenor India), while Vodafone Idea may have to pay about Rs 54,184 crore. The remaining liability is with state-owned BSNL, MTNL and some of the shut/bankrupt telecom companies.
Arora said he did not buy telecom stocks and he did not like the sector, as he was worried over Supreme Court judgments that changed every now and then.
"I read in one report that just because of telecom tariff hike there would be 60 bps increase in core inflation in the next quarter and that may be one reason why he RBI did not cut rate yesterday," he added.
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