i Develop Stocks Advisory

Budget concerns …………. There are 2 major concerns market players have expressed in a poll of 1000 odd sample interview by IDEVELOP team with regard to Budget 08. The first concern by few FII and big broking houses have raised is Rs 60 K crs waiver could mean the fiscal deficit manipulation which is opined as not good for the health of the market. Another glaring omission was no provision of oil and fertiliser bonds in the Budget. It is expressed that the fiscal deficit could have been 4.15 pc instead of 2.5 announced. Our views…. First of all the 60 K waiver is not forming part of Budget. F M is yet to reveal the modus openandi of the same. There will be some measure through which he is confident to resolve the issue out of Budget. It is only question of making Rs 20000 crs to the banking systems as part of liquidity which can be easily managed. In any case since this is going to happen in 3 years the impact on the current year could be as low as Rs 20000 crs if at all which is equivalent to amount benevolent out of the tax relief on account of higher slabs. Rs 20000 crs could mean only revision of fiscal deficit to 2.87 pc which is still better than the FRBM schedule and hence no hue and cry is warranted. The oil bonds and fertiliser bands are already factored through the provision of subsidies and budgetary plan outlay and hence will not have much impact. The next issue was from the trader’s perspective…. Traders have expressed concern of additional tax liability due to change in mechanism of STT treatment. Earlier STT was considered as tax credit whereas now the same will be considered as business expenditure. Our views…. Some fraternity will definitely get affected because the net income after set off of business expenditure will remain taxable at the maximum rate of tax. E g if a trader has 30 lacs profit and paid Rs 9 lac STT would now folk out additional Rs 6.3 lacs tax. However, it will benefit some other categories. E g if a trader has income of Rs 30 lacs and has paid Rs 70 lacs as STT then entire Rs 70 lacs could be deductible from his other business income such as broking and any other. This will put at rest the ambiguity of tax treatment of short term huge volume trades as STCG or business income as the gap in both the taxes will get narrowed by and large. The intent is very clear. The Hon’ble F M has done away with the procedure of procuring certificate of STT and claiming the same as part of tax payment which was really cumbersome. If the revenue from STT is looked then you can understand that the Hon’ble FM has estimated only Rs 1500 crs more from STT in this budget. This Rs 1500 could be solely assigned to the change in method. This could also be a part volume growth like every year. Hence there is really speaking no impact and hence there is no need for market to react on this. In any case the Hon’ble FM has given concession of Rs 20000 crs in the form of increased slab of income and hence Rs 1500 crs is just a compensating provision. Conclusion…. Once again we rate this Budget as one of the best in the given set of circumstances. Market standing with all negative factors such as all time high oil, high commodity prices, higher inflation, global turmoil, slow down, lack of interest, year end considerations , lack of liquidity, no major open interest, sentiment running low and low there is nothing which can stop from market to form a rock solid bottom. From here on things can only improve and not go worse. We have positive bias for market though it may react to overseas clues in the short run.