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Finance Budget 2019, India Ready to Make Markets More Attractive soon
The Macros are shifting in India. With this budget 2019 seems like NDA 2.0’s aims to make the domestic markets more attractive and accessible to foreign investors
And Macro investors like Jim Rogers must be smiling, so are the value investors because they will soon find bargains.
It looks like even the Modi Government is anticipating a big crash and Bear and position itself to collect Maximum revenues i.e taxes
Following are the key takeaways from Finance budget 2019, India
Mandatory increase in Public Float to 35%
Although the Government of India proposed a mandatory increase in Public shareholding to 35%. The Market regulator SEBI yet to confirm this. But the government is certainly sure of it.
If Regulator follows the government proposal, Then Around 1400 listed companies where promoters holding are over 65 percent stake will have to offload to meet the new requirement, Resulting Around Rs 4 Trillion of excess equity supply in the Indian Markets.
Here is the list of Top 20 companies will get affected
Many Blue chip companies are in Dilemma whether to sell excess holding or delist their company
Delisting will be Double taxable to investors (See buyback taxes below).
Security Transaction Tax In Derivative.
Till now, In Option Trades, the buyer had to pay STT at 0.125 % of the settlement price.
And when an option is not exercised, the seller had to pay STT at the rate of 0.05 % on the option premium received.
This Budget streamlined the Securities Transaction Tax (STT) by restricting it to only the difference between settlement and strike prices in case of exercise of options
From now STT will be charged only on the difference between Settlement and Strike price if option exercised.
So, Expect more trades expiring “in the money”
The FII/Big investors can now make positions through Options with lesser risk and money.
Here in Investorchief believe that scrips with the mandatory Delivery settlement will experience more volatility, so the more chances of the find bargains. you might want to compare your List of “Circle of competence” list with List of Mandatory Physical Delivery settlements for Derivatives.
BuyBack Taxes Surprise in budget 2019
In the Bull markets, Companies often use Buybacks to drive prices higher.
But now, It will be 20% BuyBack Taxes in Addition to 10 % Long term capital gain taxes re-introduced in the earlier budget by then Finance Minister Arun Jaitley.
This will also put an extra burden on the companies who are thinking of Delisting or just using buybacks to drive the prices of stocks.
Double taxation on the hand of the investor will also be the Deciding factors in coming days to come.
Current signs are not good given the recent lower GDP growth & slower consumption rate. Indian public Banks are still in trouble, Newer NPAs are being reported day by day. Government bailing them out using Public money. Government providing the stimulus but markets are Still failing or hardly performing well. Punishing rich with extra taxes. These are classic signs of a weak market.
while the Markets were rising and getting narrower by the stimulus efforts. Likewise, the corporate earnings and dividends were not increasing,
so it will be natural to expect that some corrections or bear is around the corner
just waiting for some event to trigger it
Which the reason that Short term Traders are bracing for the markets. But Long term value investors are rejoicing as Soon many bargains will be available in future-forward.
What you think, what will be the “Trigger”?Could this be the trade war or this budget is? or anything else Let us know in the comments