Budget 2017: Revival of Equity Markets

The immediate popular perception is that Budget 2017 is favourable for stock markets, which is why as you read this; the stock market indices are up. In fact, the Budget was on the softer side of expectations: the finance minister didn’t change what could have been the harsher long-term capital gains on equity investments, which was being assumed would either result in the lock-in of equity investment going up to three years from the current one year, post which the tax is nil. The minster has offered a number of sops to middle-class individuals as well as first time taxpayers without penalising any section of the taxpayers heavily.

For investors in equities there are two measures, especially, that could trigger an equity revival. By not touching the taxation on gains from equity investments should rekindle interest in equity investing and by waiting for GST to be implemented are factors that have been already factored in by the markets, making little room for any segment of the economy to complaint. Boost to housing sector, will have its impact on the allied industries – cement, paints and other accessories.

But why equities now is more a factor of the base fixed return that the government is willing to part with at 8 per cent, should increase the confidence among those who are sceptic about investing in stock markets to think again. Investing in equities is not only tax efficient; it is also the only asset class which can beat inflation. At the same time a lower interest rate could help bond funds and banks’ bottomlines. 

olmdesk@outlookindia.com