Capital gains Tax will not have a much more sustainable impact for Investors
FinTech BizNews Service
Mumbai, July 28, 2024: Sanstar, one of the largest manufacturers of plant-based specialty products and ingredient solutions, closed its mainboard IPO for listing in the week gone by.
Primary Market Update
The Sanstar IPO saw robust demand, especially from Qualified Institutional Buyers (QIB) and Non-Institutional Investors (NII), being oversubscribed 83 times.
India's capital markets are playing a vital role in the country's growth, thanks to advancements in technology, innovation, and digitization. Both domestic and global investors are showing significant interest in the Indian stock market, making it an attractive destination for investment. This interest, along with sustained activity in IPOs, has propelled the Indian market to become the fifth largest in the world by mark capitalization in the fiscal year 2024, according to an analytical report by Pantomath Capital Advisors Private Limited, a leading Mid-Market Investment Bank.
Indian Market update
The Indian Market remained volatile for the week due announcement of Union budget. The Government promised to present a detailed roadmap for our pursuit of ‘Viksit Bharat’. In line with the strategy set out in the interim budget, this budget envisages sustained efforts on the following 9 priorities for generating ample opportunities for all. Subsequent budgets will build on these, and add more priorities and actions. This budget details some of the specific actions to be initiated in the current year towards fulfilment of these priorities with potential for transformative changes. The budget also covers some of the previously made announcements with an intent to strengthen them and step up their implementation for expediting our journey towards the goal of Viksit Bharat. The budget envisages sustained efforts on the following 9 priorities for generating ample opportunities for all which are: Productivity and resilience in Agriculture, Employment & Skilling, Human Resource Development and Social Justice, Manufacturing & Services, Urban Development, Energy Security, Infrastructure, Innovation, Research & Development and Next Generation Reforms.
The budget emphasizes capital allocation and Policy measures to boost the majority of sectors which will help to continue the long-term growth of the economy. The government tried to boost Agriculture sector for Revival of rural economy. The government has also provided special attention to MSMEs and labour-intensive manufacturing. A comprehensive package has been formulated, covering financing, regulatory changes, and technology support, to help MSMEs grow and compete globally. The Government has proposed various urban developments to boost the housing sector. The Government continues to provide various policy measure for promoting Renewable energy sector. The Central Government allocates Rs 11,11,111 crore for infrastructure remains same as budgeted in interim budget, 3.4% of GDP, boosting the economy. The Budget proposes to simplify norms pertaining to FDIs and promote opportunities for using Indian Rupee as a currency for overseas investments. Fiscal deficit target reduced to 4.9% (5.1% budgeted in interim budget) & 4.5% of GDP for FY2024-25 and FY2025-26 respectively.
The Government made a Comprehensive review of the indirect Tax rate structure for ease of trade, removal of duty inversion and reduction of disputes. The proposals for customs duties intend to support domestic manufacturing, deepen local value addition, promote export competitiveness, and simplify taxation, while keeping the interest of the general public and consumers surmount. The reduction of custom duty for certain inputs of different sectors will be beneficial for Make in India manufacturing. The Government came out with certain Direct Tax Proposals with an objective to reduce the compliance burden, promote entrepreneurial spirit and provide tax relief to citizens.
Union Budget proposes an increase in STCG from 15 % to 20% and LTCG from 10% to 12.5%. It may sentimentally affect for short term but the way the long-term outlook of the equity market remains positive, it will not change Inflow to the equity market. In our view, Capital gains from the equity market are intact on two factors- One is corporate earnings growth and two is domestic fund flow which is going to continue further to drive steady upside. So Capital gains Tax whether STCG or LTCG for Short-term or Long term Investors will not have a much more sustainable impact. Capital gains are intact, only the capital gains tax is higher. Conclusively, the overall budget is balanced financially & fiscally.
Global Market Update:
The US market witnessed profit booking and remained negative for the week. President Joe Biden announced he will not seek re-election and endorsed Vice President Kamala Harris as the Democratic nominee. However, analysts noted that Biden's decision was widely anticipated by the markets, and Donald Trump so far remains the favourite to win in November. Markets are still betting that the Fed would deliver a 25 basis point rate cut in September, with at least one more reduction seen before the end of the year. San Francisco Fed President Mary Daly noted that, despite recent improvements, more confidence is needed to ensure inflation is moving sustainably toward the 2% target. Meanwhile, the European Central Bank held rates steady as expected, with President Christine Lagarde stating that the September decision remains "wide open."
Brent crude trading around $81 per barrel. It remained negative for the week. The prospects of an approaching ceasefire deal between Israel and Hamas, mediated by Egypt, Qatar, and the US, exerted downward pressure on oil prices. Concerns about weak demand in China, the world's largest crude importer, also persist following the country’s economic slowdown. Recently, China’s Q2 growth was 4.7%, the weakest expansion since early 2023. Broadly as mentioned earlier, it continues to trade within range with geopolitical tension and fear of economic slowdown worry.
