Pre-Budget market expectation – Avighna Trades

5 years ago

Mr. Shivendra Foujdar, Founder and Managing Partner, Avighna Trades – ,

(Shivendra has over 12 + years of extensive experience in securities, insurance and banking industry. His previous stint was in a senior position at a leading private sector bank.)

Stock market is likely to trade in a tight range in the run up to the budget, Market is patiently watching the rewards given by existing govt. to the public for their likely 2^nd term in centre. This budget may be a populist a budget (a farmer and middleclass attractive) will be given to win elections. This will impact indices in a negative sentiment in short-term scenario. At the current level, it is pricing in a stable government. The market will get impacted in the short term by this budget. However, in the long term fundaments will prevail. How the companies increase their profit and how the economy can grow.

After 1^st of February (interim budget) scenario will be changed from narrow range to a define direction. We strongly believe that his populist budget can drag indices down in short term. Market reacts to the fiscal policies taken by govt. in this budget. If we go back in early days of fiscal profligacy, it could affect long term. While demonetization and GST have helped govt. to expand tax revenue growth but this could not enough to meet fiscal profligacy.

Tax changes that are likely to be changed in this budget is tax slab. One can expect a 5 lakh, for salaried class to double the income tax exemption threshold from present 2.5 lakh. This decision could be taken by finance ministry after 10% reservation in jobs and educational institutions for the economically backward general category is given by centre government in recent parliament session.

Currently, income up to Rs 2.5 lakh is exempt from personal income tax. Income between Rs 2.5-5 lakh attracts 5 percent tax, while that between Rs 5-10 lakh is levied with 20 percent tax. Income above Rs 10 lakh is taxed at 30 percent. Rs 5 lakh exemption is only applicable to individuals of over 80 years.

There is now tax rebate would be given to corporate. A company is taxable at 30%. However, tax rate is 25% if turnover or gross receipt of the company does not exceed Rs. 50 crore.

With additional Surcharge: 7% of tax where total income exceeds Rs. 1 crore 12% of tax where total income exceeds Rs. 10 crore Education cess: 3% of tax plus surcharge. In a scenario where tax slab may be increased from current of 2.5 to 5.00 lakh public and enterprises will be benefited by demand. More people likely to add different consumer durable items in their portfolio. Demand for these products increased unexpectedly.