“We would rate it as 4/5. The Budget is in sync with the expectations of being a populist,” Divam Sharma, Founder and Fund Manager at Green Portfolio said in an interview wih Moneycontrol.
LTCG (Long Term Capital Gains) and STCG (Short Term Capital Gains) tax increases were in line with expectations, said Sharma, a Member of The Institute of Chartered Accountants of India, who has worked with banks including Kotak Mahindra Bank, Citibank, and IMGC in the past.
Sharma, who has over 14 years of experience in investment management in stock markets, bets on agriculture and renewable energy segments post Budget.
What is your rating for the Union Budget and is it really a game changer?
We would rate it as 4/5. The Budget is in sync with the expectations of being a populist. There have been announcements for spreading prosperity among the larger population of the society. The spending on agriculture, infrastructure development, skilling, and startups has the potential to create a multiplier impact on the economy and can unleash the animal instincts of consumption participation coming from the broader population.
We have also seen an emphasis on technology solutions and AI which is forward looking. Fiscal deficit target at 4.9 percent look conservative considering the announcements.
LTCG (Long Term Capital Gains) and STCG (Short Term Capital Gains) tax increases were in line with expectations. The markets might have some reaction to this, although this was in expected lines with the existing and potential gains financial assets offer and we expect the continuity of liquidity to the markets unlike in 2018.
Angel Tax abolition is a welcome step as we plan to step up the startup ecosystem.
Also read: Budget 2024: Here’s the full text of Nirmala Sitharaman’s speech
Are the LTCG, STCG and STT hikes a big negative for the equity market?
The tax hikes on capital gains are on expected lines with the existing and potential gains financial assets offer and we expect the continuity of liquidity to the markets unlike in 2018. The FM has increased the threshold amount for taxation to seemingly compensate for the increased taxes, but that isn’t much relief to investors. Investors surely are disappointed but markets however will be fine soon. This is nothing new for the Indian markets, which saw even a 20 percent LTCG tax two decades ago, and it’s still lower than a few other asset classes. So, while the investor sentiment will stay a bit dull for some time, it will soon recover.
With good allocation to manufacturing, infrastructure, and more, the economy is poised to grow, and as we’ve seen, the markets grow when the economy does.
Do you see the continuation of buy on dips strategy?
Yes. We see the continuation of the Buy the Dip strategy. Post LTCG and STCG announcements, we saw a major dip in the market despite the fact that the Budget was in line with the market expectations. More than Buy the Dip, we would prefer SIP as a form of disciplined investment. Considering the Budget announcements, some pockets will do really well, hence we can see sector rotation and stock rotation playing in.
Also read: How will Budget 2024 impact you? Here’s a look
Which are the sectors to pick for your portfolio post Budget?
Agriculture
The FM has announced nine priorities starting with agriculture. The government did not see much support from farmers during the elections and this looks like a measure to mobilise them. MSP for all major crops has been increased. It’s very much to the benefit of farmers as a promise of a 50 percent margin over the cost of production has been made for MSP. The Gareeb Kalyan Anna Yojana has also been extended.
One thing we particularly like is the support being lent for shrimp production, and financing via NABARD. We have a stock in our portfolio that is into shrimps. The Centre is moving more and more towards technology so improving digital public infrastructure for agriculture only makes sense. With an allocation of Rs 1.52 lakh crore towards agriculture and allied services, this Budget is focusing well on agriculture and rightly so.
Also read: FM Sitharaman keeps FY25 capex target unchanged at Rs 11.11 lakh crore in Budget 2024
Renewable Energy
The government reiterated its focus on resource efficient economic growth. PM Surya Ghar Muft Bijli Yojana, which was announced in the Interim Budget in February, continues to benefit more than 1 crore households with 300 units of free electricity. The government has also announced facilities for research and development into nuclear energy as well as a Pump Storage System for efficient distribution of renewable energy.
How do you read ‘the removal of angel tax for all investor classes’?
The majority of the Budget focused on skill development, self employment and entrepreneurship. If we look at the history of angel tax, it was introduced a decade ago on funds raised by unlisted companies as a measure to prevent money laundering in case the company raises funds at a valuation higher than the fair one. We have one of the largest startup ecosystems in the world. With the removal, startups will now have more capital at hand without any stress on tax payments.
Is the cut in corporate tax for foreign companies to 35 percent from 40 percent enough to attract foreign direct investment?
A 5 percent reduction in the corporate tax rate might now appear very lucrative but it’s a step in the right direction. The step signifies the government’s attempt to increase foreign direct investments. The equity FDI inflows in India decreased by 3.49 percent in FY24 to $44.42 billion. The government has also proposed to ease FDI by simplifying the process and also promoting the use of Indian currency for overseas investments.
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