Mat Revision Tops Agenda For Players
Revision of Minimum Alternate Tax (MAT), abolition of double taxation on dividends and ATM benefit for corporates are some of the key sops the capital market is looking for in the coming Union Budget.
Though the underlying mood is upbeat, there is also a definite amount of uncertainty on account of the unrealised promises made earlier by the finance minister, marketmen say.
Says Sanjiv Sanghvi of James Capel: FIIs had put in substantial funds in the pre-Budget market last year. This time, however, they are waiting for the announcements to be over. The reason being, as Sanghvi points out: Putting money in the pre-Budget gamble is a thing of the past as far as FIIs are concerned.
Concurs Dhiraj Agarwal of SSKI Securities. Some US funds of late have been active in the stock market. Some of the medium-term players are selling in view of a possible slump if promises are not kept, while the long-term players are buying in small quantities.
According to Agarwal, the long-term players are not concerned of a temporary slowing down of the economy or a poor performance by Indian corporates. In fact, according to sources in a leading foreign brokerage, the market expects bad corporate results for this fiscal.
Also, there is a doubt about an increasing fiscal deficit and also on the deficit of the oil pool account. However, all these problems could be solved by the government if it announces sops for the market, said a leading BSE broker.
Overall, there is very little FII presence in the market, said a source from Jardine Fleming. And, it should not be expected of FIIs to prop up the market......the small investor has to be wooed back into the stock market, he added.
The revision of MAT tops the prescription leading market players suggest. The finance minister had indicated that MAT could be reviewed as early as December. However, despite promises, nothing has happened on that front. In fact, the prime minister's quotes on MAT in the recently concluded Advantage Maharashtra seminar has led to more speculation in this subject, said a BSE corporate broker.
However, as James Capel sources said: If the government plans to raise Rs 8,000-10,000 crore by way of PSU disinvestment, then it has to provide sops to the investors and the intermediaries. The issue of removal of double taxation on dividends has been hanging fire for quite some time and there is an urgent need to resolve this issue, commented a senior official from a public sector AMC. As interest rates go down, returns from fixed income securities would also come down. There is a need to address the investing public on this issue.