Union Budget 2024 'broadly positive despite higher tax on capital gains and higher STT,' says MD & CEO of HDFC Securities

'Cutting rates for TDS and allowing TCS amounts to be set off against TDS liability for employees are welcome measures,' he also said.

Finance Minister Nirmala Sitharaman presented the Union Budget 2024 on July 23, 2024. Ahead of the Union Budget 2024 presentation, news emerged that Prime Minister Narendra Modi may face troubles this time, to accommodate the wishes of his alliance partners JD(U) chief Nitish Kumar and TDP supremo Chandrababu Naidu.

The Union Budget for FY25 on Tuesday unveiled big-ticket measures for Bihar, proposing a total outlay of over Rs 60,000 crore for various projects, including funding for three expressways, a power plant, heritage corridors and new airports and sports infrastructure.

Similarly, for Andhra Pradesh, whose ruling TDP recently joined BJP-led NDA, she allocated Rs 15,000 crore in financial aid through multilateral agencies. A similar request for support to Bihar will be expedited, she said.

Check out how India reacted to the Budget right here

Here's what Dhiraj Relli, MD & CEO, HDFC Securities, said about the Budget:

"The latest Union Budget on an overall basis is broadly positive despite the higher tax on capital gains and higher STT. The negative sentimental effect of the higher taxes may be over in a couple of days."

He added, "The provision for boosting spends in the agri sector, increase in spend on affordable housing, new schemes to provide incentives for employment generation etc. may lay the foundation for medium-term inclusive growth, further stating, "The sharp cutback in net borrowings and a cut in fiscal deficit could have a positive impact on interest rates and the attitude of foreign investors and rating agencies towards India. There exists a chance of a rating upgrade for India a few months down the line."

He also said, "The nominal GDP growth for FY25 is expected at 9.9-10%. Given the fact that the FY25 real GDP is slated to grow at 6-8-7%, the inflation is derived at ~3%. We think there could be an upside to the nominal GDP growth estimated."

Here are some of his other observations regarding the Budget:

- Based on the series of announcements made so far, the Budget has made provisions for increasing allocation to rural areas and the agri sector. This could spur consumption in rural areas. Putting more money in the hands of urban people by way of higher standard deductions, higher deductions for family pension and changes in slab rates under the new tax regime will do the same for urban consumption. Separate encouraging measures have been spelt out for the aquaculture/seafood industry, and leather and textile sectors.

- Cutting rates for TDS and allowing TCS amounts to be set off against TDS liability for employees are welcome measures.

- Cutting import duty on Gold will moderate the rise in gold prices lately and make gold a bit unattractive as an investment avenue at least temporarily.

- The Employment-linked incentive scheme has the potential to create lakhs of jobs if implemented well and make India’s growth more inclusive. A number of farming and rural-led initiatives could continue to boost rural incomes and the economy and have trickle-down effects across the larger economy with some lag.

- Investors are more concerned about possibilities to make money or gains rather than get too bothered by a 250 or 500 bps increase in tax rate from a low base. As of now the Indian market offers opportunities to make money and hence the move to raise capital gains tax may not dissuade investors. However, as the difference in the rates has risen to 750 bps from the earlier 500 bps, investors may, if all things stay the same, want to hold on to their investments for a longer period to avail of the lower rate, displaying better investor behavior. Also, the hike in the exemption limit from Rs.1 lakh to Rs.1.25 lakhs for LTCG is welcome and may offset to some extent the higher incidence of tax due to higher rates.An increase in STT rates may have some impact on depth and liquidity, especially in the F&O markets, post Oct 01, but Indians are adept at adjusting to emerging situations and we are not too worried about the medium-term implications of this rise.

- Focus will now turn to the progress of the monsoon, balance Q1 corporate results, global interest rate trends, local political developments including state elections and US presidential elections and their likely impact on India.

- Corporate earnings may see an upward revision if the monsoon progresses well and macro parameters continue to show encouraging trends.

- A big event is out of the way and so is its overhang. The outcome not being more negative than expected/possible, the markets recovered well from the lows of the day. Dip buying may continue for some time as foreign investors may be broadly happy with the overall thrust of the Budget.

- Valuation of Indian markets may inch up a bit but a sharper rerating may require a higher level of visibility on macro stability and micro growth. We remain cautiously bullish on the Indian equity market post the latest Union Budget.

Union Budget 2024 LIVE | Making a record for any Finance Minister, Nirmala Sitharaman presented her 7th consecutive Union Budget on July 23, 2024 under the Modi 3.0 government. This Budget brought tax relief for the middle class, while focusing on jobs through skilling, incentivising employers. Track the latest coverage, live news, in-depth opinions, and analysis only on Deccan Herald. Also follow us on WhatsApp, LinkedIn, X, Facebook, YouTube, and Instagram.