Expectations from the Budget under Modi 2.0

TradingBells asked a few analysts about what are the expectations from the upcoming budget under Modi 2.0. Below are the key points noted.  

What are the expectations from this Budget 2019 from Modi 2.0 for the investor community in general?

One of the most important expectations from the upcoming budget for the investor community in general would be that the reduction in Corporate Income Tax rates. The government reduced the rate to 25% for MSMEs last year, the same can be extended to the entire corporate fraternity. That would give a boost to the corporates and to investor confidence alike.

One other important metric which the investors would be watching out for is the fiscal deficit target which the government sets for the coming year. Last year it was set at 3.4% and if this is raised in the upcoming budget, it would not be good news for the markets as it may have a direct impact on the currency as well as the government bond yields. A rise in bond yields would reduce the chances of RBI cutting interest rates any further this year thereby contracting the liquidity in the markets.

Sector specific spending may rise in Infrastructure & Real Estate sectors such as Roads, Power, Construction, and Affordable Housing. Other than these, Defence sector had the highest spending last time which the government shall continue in the current year as well.

Top 5 reforms which investors are looking out in the upcoming budget? 

1) Securities Transaction Tax has been high since a long time and the investors are waiting for this to be brought down. Lowering of the STT will be very positive for the domestic stock markets and can overshadow other changes such as higher LTCG taxes, if any.

2) The government has taken a target for homes for all by 2022 and we can expect further reforms for the affordable housing segments this time.

3) Government may also focus on divestment for some of its entities such as BEML, Air India, etc. It may announce more CPSE ETFs launch in near future for this purpose.

4) Renewable energy sources such as Electric Vehicles could get a boost in the form of tax exemptions.

5) Reducing the corporate income tax rates to atleast 25% would be a welcome move.

Any tweaks which could come in this time around which could impact the investor community? 

The Finance Ministry may decide to raise the tax rates on long term capital gains (LTCG) once again this time. This could create a negative sentiment amongst the investor community and may impact the markets negatively.

So what do you (the readers) think? Please post your comments on what do you expect from the upcoming budget below.