July 28, 2024   |   Read Online

 Tax Reckoner

• Markets rallied despite a fairly disappointing budget if seen from a direct tax perspective

• Gold prices fell between 5%-10% ( Physical/ SGB’s and ETF’s) due to the reduction in customs duty aimed at curbing smuggling

• Nasdaq fell sharply as results from some big tech weren’t in line with expectations

• Interest rates fell on very positive numbers on the fiscal front

• Earnings season has been a tad disappointing

• Liquidity and technicals seem very supportive of higher market levels

• We will strongly recommend staying clear of small caps, large and mid caps continue to look fine from a medium-term perspective

• Negative Triggers - (Domestic political uncertainty, US political scenario, US/ European debt situation, Escalation of geopolitical issues) – Barring these we feel the bubble could continue to get bigger and larger

• International Funds get attractive again from a tax perspective – we might recommend Nasdaq at 16,500 levels and a SIP in Japan funds

• Investors holding debt funds with purchase dates before 31st March 2023 should continue to hold despite the tax being slightly adverse now relative to pre-budget.

• The prices of SGB’s trade at a significant premium to spot prices largely on expectations that incremental issuances might not be coming ( Though no official or unofficial word has been communicated so far)

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• SEBI research paper on derivatives and trading - Read More

• The end of SGB’s - Read More

• Budget highlights by Cleartax - Read More

• The death of the dollar - Read More

• Tennis Balls and Eggs - Read More

What is the outlook from the budget?

Answer

1) No point of fretting about what could happen in future

2) Despite higher tax rates, lets hope the other measures are implemented well which will lead to better topline returns on both real estate and equities

3) Clear push of the government to a) Reduce short term trading and kill short term investors, b) Promote the new tax regime, c) Tax Capital Gains

4) For investors

a) Equity continues to remain the best asset class in the medium to long term

b) Non Equity investments seem only as an asset allocation and would hardly beat inflation

c) Arbitrage Funds are a great option to make hay while the sun shines for the non equity deployment

d) Avoid thematic plays, though infrastructure pockets would continue to do well, pharma could be a dark horse, energy is a great theme for next 5 years for a small exposure

e) Real Estate is best used for end use ( Tax Benefits in the new regime would occur if your returns are kinda in double digits )

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