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00:00Ramdev Aggarwal, chairman and co-founder of Motilal Oswal is with us, so we need to go
00:04across to that conversation.
00:05Mr. Aggarwal, great having you.
00:07Thanks so much for taking the time out.
00:08What is your initial assessment of the budget?
00:10The market seems to have taken a budget with capital gains, tax being hiked rather well.
00:18Yes.
00:21So Neeraj, I would say that it was in any case expected to be a capital market heavy
00:29budget and FM has delivered to that promise.
00:33So long-term has been increased, short-term has been increased, STD has been marginally
00:37increased.
00:38So clearly there is a, I was a bit disappointed with the increase in the long-term taxation.
00:45Not that it hurts me a lot, just that the asset class should be encouraged.
00:50When the SIP flow is coming, the whole nation is becoming very inclusive and it is fundamentally
00:56a long-term kind of a story and there I think they should not have changed the long-term
01:04capital gains tax from 10 to 12, short-term, speculative, whatever you do.
01:08So otherwise I think it's a consumption oriented budget, they have given something to everybody.
01:14So I think that consumption boost will come to some extent and the guys who make money
01:20in the market, see market facing economics has not changed fundamentally.
01:23They have not changed the market facing economics.
01:26Only thing is after you have made money, you pay little more taxes, which is kind of not
01:31an unfair kind of expectation.
01:33Mr. Agarwal, very good afternoon and great to have your take.
01:39In terms of just what the impact is of capital gains, do you think that this initial hit
01:44will sort of recede, the market will be able to digest it after a point and are you disappointed
01:50that they have tinkered with long-term capital gains tax or was that coming sooner or later?
01:59Yeah so that's what I was saying that they have not changed materially the market facing
02:04economics.
02:05When I come to the market, first I need to make money, then only I pay taxes.
02:08So my market facing economics remains same.
02:13So basically yes, there is some amount of change in the STT for high, I think high frequency
02:20traders will pay a lot more than what they are paying.
02:23So I think they have hit the heart of excessive trading.
02:27I think that's where the trader may pay small amount but actually government will get lot
02:34of money out of that change in STT.
02:36That's my sense.
02:38Second I think the capital gains tax, I think every level has been increased long as well
02:44as short.
02:46So I think it's a long-term change and people have to get reconciled to paying little higher
02:50tax only if they make money in the market.
02:53The issue is whether you make money in the market or not and that is not dependent on
02:57your taxation charges.
02:58It is dependent on what happens to the corporate earnings and I think corporate earnings will
03:03definitely get a boost out of the consumption which will be there across the board thanks
03:09to what concessions they have given.
03:11Are you seeing enough Mr. Agarwal to really boost the consumption story in a longer view?
03:16I mean today we might be seeing a very momentary response in that space and in those stocks
03:23because of what they have done on employment or the new tax regime etc.
03:26Do you think enough has been done to really move the needle because we have been talking
03:30about consumption at the bottom of the pyramid needing that boost?
03:36See, this consumption or GDP growth pickup, consumption pickup, I mean it's a multifaceted
03:44kind of thing.
03:45I mean it's not the one thing, one taxation benefit here or there that's going to impact.
03:50I think a good monsoon across, our governor is already saying that the rural demand is
03:57picking up recently.
04:01So I think the good monsoon and now widespread benefit to the masses whether it is standard
04:10direction or lower tax rate or stipend and the job subsidy.
04:16So all those things will over a period of time should give boost to the consumption
04:21and that will, see the FMCG companies or consumer companies which are not doing well, I think
04:27that's where I think you will get some earnings pickup over a period of time.
04:30So my sense is on the whole it will be accretive to the corporate earnings, it will be accretive
04:35to corporate earnings but some kind of a little more taxation for the people who are making
04:42money in the stock market.
04:43Mr. Agarwal, hi, it's also Samina joining in.
04:46So it's back to business then, budget is behind us, where from you?
04:51What should investors be doing?
04:53Do we, does the budget give us an excuse to correct from here, take profits off the
04:58table or will the fact that it's a neat, clean, fiscally well-consolidated budget give the
05:04market the impetus for the next leg of the rally from your own?
05:12Yeah, I don't think there is any impact to the market outlook.
05:21I mean whatever was the outlook before the budget, I think it remains fully intact and
05:27because right now market outlook is dependent on whatever the corporate earnings expected
05:31for next one year, I would think that corporate earnings will get little bit, almost half
05:36percent to one percent boost out of this budget.
05:39Second, I think the flow which is going to determine the overall demand for the securities,
05:44that remains intact.
05:45So I would think that if market has to go at the rate of 15 percent for next five years,
05:50that doesn't get impacted at all.
05:51So the true investors who are coming through SIP revolution which is on, I think they must
05:56continue and they must make sure that in the next month or so if there is a correction
06:01in the market, then also they continue with their SIP.
06:04So I would think it's a perfectly healthy environment for long-term investing.
06:10Mr. Agarwal, there was a lot of talk of how the money or the extra bonanza from the Reserve
06:17Bank would be used.
06:19It seems that because there is only eight months left, there isn't as much capex that
06:24could be done.
06:25So it seems that the government has opted for higher fiscal consolidation.
06:30Is this a nudge to global rating agencies as well that we are doing something which
06:35the other global nations aren't quite doing?
06:42I would think so, but we have to listen to the interviews of the finance secretary and
06:46the FM of the post-budget presentations and what strategy went behind in terms of fiscal
06:52consolidation because a lot is happening beyond the budget.
06:57There is a bond inclusion, JP Morgan bond inclusion.
07:01So you are seeing the flow.
07:02Last week itself, our forex balance went up by $8-9 billion.
07:06So now I think they must have been waiting for the budget and the post-budget.
07:11Again I think you see the FDI and FI flow picking up.
07:14So my sense is that we are in a very sweet spot as far as the foreign flow is concerned
07:19and budget is just about one of the small events on the way and they have basically
07:25maintained the environment, the positive good feel factor in the economy that has been fully
07:31maintained and they have given a little more boost.
07:33So my sense is that tomorrow people will forget what has come in the individual taxation and
07:41I think there is one more big thing about abolition of the buyback tax and then the
07:50taxation will be in the hands of the recipient.
07:52I think that is a huge bonanza for the actually promoters.
07:58Promoters earlier were paying 20% tax at the corporate level and if it has to be paid in
08:02the hands of promoters, then they will pay only 12.5%.
08:06So my sense is, let's see what is there in the fine print, but it looks like a very big change.