ALSO READBudget 2018: From digitisation to NPAs, a lot expected for banking sector Budget 2018: Budgetary support for Indian Railways to be cut by 27% in FY18 Budget 2018 might have Rs 740-bn allocation towards fertiliser subsidy Markets end at record high, Nifty above 11,100 as FY19 GDP seen at 7-7.5% Sensex ends marginally lower, Nifty holds 11000 as investors await Budget
Sensex top gainers and losers Market at close Benchmark indices ended marginally lower after the government imposed a long-term capital gains tax. Budget 2018 has proposed to levy long-term capital gains tax (LTCG) of 10% on gains exceeding Rs 100,000 from sale of equity shares. The S&P BSE Sensex ended at 35,906, up 58 points while the broader Nifty50 index settled at 11,016, up 10 points. With LTCG, free ride for markets is over, says Andrew Holland The main focus of Finance Minister Arun Jaitley, while presenting the Budget 2018, has been on the rural sector and infrastructure development. This was expected from the government in its last full Budget ahead of the general elections scheduled in 2019. The assumptions on tax revenues going ahead are reasonable and not aggressive given that the taxpayer base will increase. That said, the fiscal deficit at 3.3% of the GDP (gross domestic product) for 2018–19 is still a challenge. The economy needs to be firing on all cylinders to achieve the set fiscal deficit target. The bond yields are now nearing 7.5%. This clearly indicates that there will be challenges in meeting the fiscal deficit target. Railway, infrastructure related stocks trade mixed post Budget Shares of railway and infrastructure related companies were trading mixed after Finance Minister Arun Jaitley presented the Budget for the financial year 2018-19 in Parliament on Thursday. Titagarh Wagons, Kernex Microsystems (India) and Stone India were down 5% each on BSE. GMR Infrastructure, IL&FS Engineering and Construction Company, GVK Power & Infrastructure, Larsen & Toubro (L&T), Siemens, Hind Rectifiers and Zicom Electronic Security Systems were trading higher by up to 9%. READ MORE LTCG in Budget 2018: Investing in mutual funds? Look at growth schemes A 10% long-term capital gains (LTCG) tax has not upset the mutual funds industry. Sector officials say that the move will not have any major impact on current inflows in equity and that it will settle down fast. According to them, growth schemes will be more looked for going forward against dividend-paying schemes. According to the Finance Bill 2018, "With a view to providing a level playing field between growth-oriented funds and dividend paying funds, in the wake of new capital gains tax regime for unit holders of equity oriented funds, it is proposed to amend the said section to provide that where any income is distributed by a Mutual Fund being, an equity oriented fund, the mutual fund shall be liable to pay additional income tax at the rate of 10% on income so distributed." READ MORE First impression on Budget 2018 from Devam Modi, Director of Equirus Securities There has been a clear attempt to help the farmer, common man and SMEs with various populist schemes. Crucial rural impetus along with continued allocation to infra and a heavy focus on health care. We would have liked to see measures related to IBC or resolution of corporate credit stress. The fiscal deficit miss was broadly expected but is being considered a tad higher. Going ahead, the market is more exposed to a commodity spurt and resultant inflation given the populist focus related to agriculture. We do not see chances of rate cuts or yield moderation and remain positive on pockets related to domestic rural, infra and health sectors. Given the combination of elevated valuations and high growth potential, we think there will be a skewed reward for companies who are able to deliver steady growth.