A fundamental analyst's take on the Budget
defence and railways, that dominated the previous budgets were missing this time. This was a Budget for coalition partners, towards which Nirmala Sitharaman has loosened the purse strings. A special financial support of ₹15,000 crore will be extended to Andhra Pradesh via multilateral agencies for development.
New airports, medical colleges, highways and tourism in Bihar, and special support for Andhra have been announced. Further, the government has announced measures directed towards increased farm productivity, employment and skilling, urban development, research, affordable housing, solar energy, MSME sectors, shrimp exports, critical minerals, space economy, digitization, energy transition, and the water sector. Pre-budget, the biggest fear of stock market participants was a hike in short-term and long-term capital gains tax.
That fear has materialised. The short-term capital gains tax has been increased from 15% to 20%, and the long-term capital gains tax from 10% to 12.5%. Income from buyback of shares will be taxed at the hands of the recipient.
To soften the blow, there has been a hike in the capital gains exemption limit to ₹1.25 lakh per year. Understandably, the markets have given these measures a thumbs-down. The Sensex was down by 0.6%, the midcap index is down 1%, and the smallcap index is down 0.7%.
I don't have any budget-based recommendations or trades. I would instead recommend avoiding any knee-jerk reactions. It is yet to be seen if an increase in taxes on capital gains and on the futures and options segment moderates the speculative forces in the markets.
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