Budget 2016 | Stocks and Commodities

February 27, 2016
Time: 11.45 am

Budget 2016:

1. Why budget 2016 is very important for stock market?
2. First, from Budget to Budget, this year our stock performance is worst in the last 10 years, worse than 2008 crisis.
3. Second the performance in February is worst in the last 8 years.
4. Simply saying this is the first time we are approaching budget with lot of pessimism in the last 10 years.
5. Though our stock markets started falling due to global cues like commodity crash, China problem, etc, in the last two months it is just falling on its own, no external factors to be blamed.
6. One main news that spooked the investors is about the introduction of Long Term Capital Gains at 10% or extending the period from one year to three years.
7. First, let us look at this issue.
8. Who are dominant players in stock market, FIIs, DIIs and Retail.
9. FIIs anyway do not pay long term or short term capital gain tax as they mostly route through Mauritius or Singapore.
10. Second Mutual Funds also do not pay as they always hold the shares for long term.
11. So it will only be the retail people who will be affected.
12. But can they decide the market movement?
13. It is clearly "NO".
14. Even in the last two months, it is the FII selling that has been dragging the market, not retail selling.
15. Even if there will be some changes in the long term term capital gains, there will be some corresponding concession in the form of reduction in STT, or removal of Stamp Duty, etc which will benefit traders.
16. Second big thing that spooked the investors is the public issue of NTPC shares by the Govt. just three days ahead of the budget.
17. Though the timing was very bad, I do not think that Govt. has done it intentionally.
18. Probably the Govt was in a desperate mood to show some figures of divestment in the budget.
19. Govt. may cut corporate tax by 1% or 2%, if they cut 2% it will be a very big sentiment booster, markets may move by 2%.
20. Other than that there are some plus and some minus and the budget is actually a non event for the market.
21. Anyway GST bill is nothing to do with budget, the passage of GST bill is more important than the budget.
22. So in my opinion, the problem is not the budget, the problem lies somewhere else.
23. It is the redemption pressure in FII funds, FIIs have to keep onselling in order to meet the redemption.
24. Our markets will stabilise only when FIIs stop selling.
25. Until then there is no point is discussing the Nifty levels.