Do it yourself

  Last week the benchmark Nifty50 crossed the 25000 level for the first time ever. Statistically speaking, it’s just a number and does not mean much in the broader picture. Nonetheless, it is noteworthy in the current context, because this milestone was crossed amidst a flurry of news flow which calls for closer attention of investors. BoJ rattled the markets by deepening commitment to normalization First of all, the Bank of Japan hiked the policy rates by 15bps to 0.25%. Governor Kazuo Ueda committed that if the economy and prices move in line with our projection, we will continue to raise interest rates. BoJ does not see 0.5% as any key barrier when raising rates; clearly indicating that the shift in BoJ’s monetary policy is definite. A steeper hike by the BoJ, than currently estimated, could present several short-term challenges for the global markets. A stronger yen on rising JGB yields could (i) adversely impact Japanese exports; (ii) worry the JPY borrowers who may have...

One thing that the prime minister Narendra Modi is well known for is his business friendliness. At the core of the famous Gujarat Model, that shot Mr. Modi to the national and international scene, was his claim of making Gujarat the most business-friendly state in India. He is also often accused by the opposition parties for unduly favoring the large corporate at the expense of micro and small enterprises and middle-class households. In the past ten years, the policies followed by the PM Modi led central governments have stayed true to his reputation. For example— ·          The effective tax rates of the corporate sector have been reduced. This has resulted in the aggregate tax collection from individual taxpayers to rise higher than the tax paid by corporations. ·          It is widely believed that the demonetization of high value currency notes and the implementation of GST have also adversely affe...

Capital expenditure (capex) has been one of the primary focus areas of the government in the past one decade. As per the Economic Survey 2024, “The focus of capex has been broad-based. Spending in sectors such as road transport and highways, railways, defense services, and telecommunications delivers higher and longer impetuses to growth by addressing logistical bottlenecks and expanding productive capacities. Government capex has also begun to crowd in private investment, as discussed earlier in this chapter. Additionally, the Government continues to disburse grants-in-aid for the creation of capital assets to the states, thereby incentivizing them to increase their productive spending.” Accordingly, “capex” has emerged as an important driver of growth, as indicated in its rising share of nominal GDP. As per the provisional actual (PA) figures for the FY24, capex for FY24 stood at ₹ 9.5 lakh crore, an increa...

One of my close friends bought a plot of land in the outskirts of the city of Dehradun in Uttarakhand, a decade ago. The reason, he outlined, for this investment was that Dehradun is a good place to retire. It is peaceful & clean and has a much lower cost of living. Considering the rising level of pollution (air, noise and water) in larger cities, people would want to move to such places in future. The property prices would therefore appreciate considerably. After a decade, the price of his plot is up by some 300%. He is happy that he made a very good investment decision. When I pointed out to him that Dehradun is no longer the peaceful, clean and cheap city it used to be ten years ago. Therefore, his investment premise has mostly failed. Besides, the land prices in many areas of the NCR have risen equal to or more than Dehradun in the past one decade. The point to ponder over is if you earn a good return on your investment in spite of your assumptions behind making such inve...

The union budget for the fiscal year 2024-2025 has been read, analyzed, criticized, and apparently brushed aside by the markets. Changes in the taxation of capital gains; changes in the custom duty and capital gain tax structure for gold; and higher rate of STT on derivative transactions are three points that have attracted the maximum attention, especially from the market participants. I had posted my first impression of the Union Budget FY25 on Tuesday. On a second reading of the budget documents and listening to the views of a variety of experts, I have gathered some more inputs that I would like to share with the readers. Impact of capital gain tax changes on equity markets The long-term capital gain tax (LTCG) on sale of listed shares has been increased from 10% to 12.5% and the short-term capital gain tax (STCG) has been increased from 15% to 20%. The market reacted negatively to the announcement initially. However, all the losses were recouped within an hour. This has sur...

 The final budget presented by the finance minister has shaken the market cart, and added material uncertainty to policy making. The efforts to minimize uncertainty after demonetization have thus been negated to some extent. As has been the practice in the past few years, the budget speech of the finance minister materially diverges from the actual budgetary provisions. By changing the capital gain tax regime and mentioning that they are working on a new Income tax law, they have forced the stakeholders to build-in a higher degree of policy uncertainty and unmindful regulatory provisions in their business and investment plans. Claiming simplification while introducing new complications (e.g., more transactions under TDS/TCS) has been a hallmark of the taxation policy in recent years. Use of technology is invariably claimed as an achievement, as if there is an option. The level of uncertainty could be gauged from the fact that the priorities outlined in this budget are materially ...

  When the Finance Minister Ms. Nirmala Sitharaman rises to present the final Union Budget for the fiscal year 2024-25 today at 11 AM, she will be creating a unique record. She will become the first finance minister of India to present six consecutive union budgets (2019-2024, in addition to an interim budget presented in February 2024. Prior to this, the record was held by the former prime minister Morarji Desai, who presented five consecutive union budgets (1959-1963). He had presented two interim budgets (1962 and 1967) also. Ms. Sitharaman’s record is impressive, in my view, because she has survived the worst economic slowdown and fiscal slippage (FY21 GDP Growth -5.8% and Fiscal deficit of 9.17% of GDP) in the history of Independent India caused by the worst pandemic since 1917 Spanish Flu; a below par election performance of her party in 2024 general elections, apparently due to sub-optimal performance on inflation and employment generation fronts; sharp criticism on GST mana...