Budget 2019-2020..Its Impact;
The new Lady Finance Minister submitted the Budget for the current fiscal on 5th July 2019. Alas, the share market did not digest the contents of the budget proposals and hence crashed like a pack of cards thereafter and the fever continues even today on 8th July. The reaction was terribly negative. The sell off was wide spread with most major sector losing heavily. Investor’ assets are substantially eroded, the market cap down substantially. 1317 scripts declined and only 467 were up. The index losses were too large to be ignored.
Why? The reasons are not difficult to identify:
- Change in basic Customs duty has been changed and increased; Higher duty may lead to rising input costs for many manufacturers whose profit margin will reduce and cannot pass on to consumers in all cases as they would become less competitive.
- Government to ask SEBI to mandate min. 35 % shareholding for listed companies and will impact the closely held companies like Wipro and there will be an overhang of supply.
- Higher excise duty on Fuel is seen as inflationary and ripple effect on all costs of consumers’ utility.
- 2 %TDS on high cash transactions > Rs 1 Cr will impact some corporate as well.
- While the threshold limit for 25 % tax rate has been extended from Rs 250 cr to Rs 400 Cr, the market expected some reduction in the rate of 30 % for all.
- Buy back Tax on listed securities will impact corporate bottom-line.
- Super rich tax above Rs 2 Cr & Rs 5 Cr imposed is also one reason.
- The concern on fiscal deficit also added fuel to the fire.
Although the Budget did contain some good features like the following the market dripped into Bearish mood and the same is stated to continue for quite some time.
- Interest paid on loan for purchasing e-vehicle will be tax deductible upto Rs1.5 Lakh.
- The first time Home buyers can get deduction of Rs 1.5 L of interest paid on new housing loan of residential house valued upto Rs 45 L
- Tax exemption from NPS withdrawal while closing or opting out increased to 60 % from 40 %.
So the market is bound to be unpredictable and more in bear mood for some time. It is advisable to be driven by care and caution.