Hey!
You might be questioning — why amid the Economic slag, are the stock markets telling a different story? Well, it seems as if the stock markets have decided to contradict the GDP numbers. We were baffled by the conundrum too, and we decided to find some answers; because we love ‘Sherlock’. Let’s take a look.
Misleading Numbers…. Sensex and Nifty have been on a roll for the past few months. Sensex hit an all-time high of 41,000 and Nifty swiftly crossed the 11,000 benchmark. The top 10 heavyweights of NSE and BSE doing exceptionally well. So are they overshadowing medium and small-cap companies?
Here is our take… The numbers aren’t really a true indicator of the exact market situation. Looks like investors and traders are practicing ‘Hope Trade’ — trading in hopes of a better state of Economy which in turn will benefit them later… Hence the Bullish Markets.
The Life Saver Tax Cut… Corporate Tax Cut from 30% to 22% had been announced by FM Nirmala Sitharaman in October 2019. The tax cut aims to improve the balance sheet, jump-start capital expenditure, spur job growth and so on. It acted as a life jacket for the majority of the companies including starving Telecom Giants like Vodafone and Bharti Airtel.
Savings are the way to go… Investments in Equity and Mutual Funds rose after a few slow months to INR 4,499 Crore and INR 8,518 Crore respectively. Worth noting that investments in Mutual Funds through SIPs have been clocking a commendable INR 8,000 crore figure for 13 months straight. Inflows of cash in Equity markets and Mutual Funds have increased the confidence of investors, providing liquidity to markets.
The Indian Optimism… All is well, rather All will be well. Since the economy has slowed down, the Government has been providing relief to some hard-hit sectors with a total of INR 1,15,000 Crore. It is highly expected and speculated that the Government will announce more sops come Budget on 1st February.
Other’s pain, our gain? India has benefited from the US-China trade war. Before Phase One of the deal was signed by the two countries… Indian exports of plastic, cotton, inorganic chemicals increased significantly.
People have voiced their opinions… A survey conducted by Local Circles — a community social media platform, concluded that the majority of the masses want more disposable income. 69% voted for the tax exemption limit to be increased to INR 5 lakh. The current exemption limit is up to INR 2.5 Lakh. Increasing the tax slab would optimistically result in a surge in consumption. But, there is a catch… how will the government get its tax revenues?
The Government missed the tax target of INR 2 Lakh crore. For a country of 1.3 Billion people, we generate a tiny amount of Tax Revenue. Eventually, the government would seek alternatives to fund growth. Considering the number of people who are eligible to pay taxes is reduced?
Disinvestments could be on the horizon… Investments in the current year are at an all-time low with a negative 1% growth rate. This is the slowest rate of investment in the last 17 years. There have been serious debates in the country regarding disinvestment. Those in support argue that disinvestments would help the Government tend the ailing sectors and promote healthy competition & profit-oriented business practices.
The flipside of Disinvestments… While those against government selling its shares often debate it to trigger price wars and predatory pricing strategies. Well, since Air India is up for sale and the 53.29% stake owned by the government in BCPL is also receiving bids from Indian Oil and other Oil Companies… more and more politicians have voiced their opinions in favor of Disinvestments. And frankly, it makes sense. Could we see some big Disinvestment announcements on 1st Feb?
Infrastructure is the best bud… According to economists, if India is to attain the $5 Trillion economy mark, Infrastructure reforms should be a priority. Increasing spending on infrastructure would help create employment, provide basic amenities for better business opportunities. Having a solid infrastructure will also enhance the competitiveness of the Indian manufacturing, infrastructure sector…
Hello Savings… According to sources, tax deductions under section 80C might be overhauled in this Budget. Its implications — More disposable income and an increase in investments both would result in better consumption.
Guess — What this Budget will behold. People are anticipating and speculating possible changes and their implications. Well, We are also extremely excited about this Budget in hopes that new measures would better the economy.
Time for government to reintroduce wealth tax.
Abhijit Banerjee
