With another 10 days to go for the presentation of budget 2003-04, the Dalal Street is pinning its hope on an 'investor friendly' budget.
Most fund managers, that the Hindustan Times spoke to, expect Finance Minister Jaswant Singh to toe the line of Vijay Kelkar. The Kelkar committee has recommended abolition of dividend tax and the long-term capital gains tax. The committee has also sought abolition of various exemptions in the tax provisions like income of mutual fund from income tax.
"The abolition of dividend tax would bring much needed inflows to the equity market which is currently starved of funds," said ASK Raymond James director, Asit Koticha.
It may be pointed out that former finance minister Yashwant Sinha had imposed the dividend tax at the hands of the recipients at individual's tax rate in his previous budget.
"Relaxation in long-term capital gains tax would bring stability to markets and encourage value investing activities," said Jardine Fleming CEO, U.R. Bhat.
There is also a strong possibility of Singh tinkering with the interest rates on small saving instrument. "Any reduction in savings rate will give a fillip to equity market. In fact, the falling bank deposit rates are a good sign for equity market," said an analyst.
The market is also expecting a reduction in corporate taxation. "This will directly boost the bottom line of the corporate sector," said another analyst.
Market observers also expect a hike in FII limit in the banking sector and disinvestment of 5-10 per cent equity in the profitable PSUs to revive the moribund market.
The market also did not rule out the political compulsion of Singh, who was brought in at the last minute to oversee the most difficult portfolio. "Being the last budget before the general election, I don't expect any tough proposals which can affect the common man," said Zurich Asset Management Company president, S.V. Prasad.
The fear of US-Iraq conflict spoiling the budget gains are also engaging the attention of fund managers. In fact, crude oil prices are already moving northwards.
Abolition of dividend tax at the hands of individuals
Concession in long term capital gains tax
Reduction in corporate taxation
Rationalisation of excise, custom duties