Why This Budget Was Liked Particularly By The Stock Markets?

The fear that was created ahead of the Union Budget, particularly on covid cess, capital gains tax and additional tax burden on the super rich were all unfounded.

Stock markets, senior citizens, investors and industry all had something to cheer in the Union Budget.

Stock markets often rally when there is something to cheer on the announcement front. Today, they cheered because there were no announcements on things like Covid cess, capital gains tax changes etc.

In fact, the budget did have a host of good things for the capital markets, including no advance tax payable on dividends, unless the dividends have been declared.

Says Motilal Oswal, MD & CEO, Motilal Oswal Financial Services: "The FY22 budget has been much better than the market's expectations. The feared and anticipated measures around Covid-Cess/higher capital Gains tax/Wealth Tax etc., did not materialize. This will provide a huge relief to market and economy and help in sustaining the buoyant sentiments in the economy.

Government has clearly articulated the focus towards Infra and Capex spending with five key measures: [1] Capex spends proposed to go up by 26% in FY22 vs. FY21 RE [2] Setting up of Development Financial Institution [3] Setting up of ARC/AMC to deal with stressed assets [4] Asset monetization plans in various segments and [5] List of CPSE's for divestments. We believe this will push the CAPEX spending in the economy and augur well for the overall economic revival of India. The significant increase in allocation to the Healthcare sector should lift the general well-being in the economy, in our view.

Separately, the honourable FM also announced several measures for relaxation of compliance and procedural burdens in multiple spheres of activities (taxation being the most prominent)."

According to Oswal the extension of tax exemption schemes in Affordable Housing is also welcome as it can provide a good multiplier effect on the GDP.

"All in all, a very good budget which avoids the pitfalls of raising taxes and at the same time provides a boost to the CAPEX/infra spends in the economy," he says.

A boost to infra spending, housing, real estate sector and MSME was also cheered by economists and industry given that they generate massive employment opportunities.

"Steps like a 1-year tax holiday for affordable housing projects and a 1-year extension for an additional deduction of interest up to Rs 1.5 lakh on loan for affordable housing will benefit all stakeholders of the industry and boost investments. Relief on TDS for dividend on REITs and InvITs will boost investment in these instruments.

A development finance institution for the infrastructure sector will facilitate funding, the good part is that it will be professionally managed to ensure seamless execution of operations," says Krish Raveshia, CEO at Azlo Realty.

Apart from this, the life insurance sector also got a boost with FDI limit being enhanced to 75%. Niraj Kumar, Chief Investment Officer, Future Generali India Life Insurance Company says, "The imperativeness of the Life Insurance sector in the economy has gained paramount importance in the aftermath of Covid and has reinforced the need for wider penetration of insurance in terms of protection and building a safety net. Budget 2022 has indeed taken cognizance of this and has taken the bold step of increasing the FDI limit to 74% from the incumbent 49% which will provide an immediate backstop in terms of capital for growth and improve the insurance penetration and financial inclusion in the economy.

Also increasing insurance penetration would pave the way for generating employment opportunities, which in turn would augment the efforts of the government to revive the economy".

While there were no changes in personal income tax rates, senior citizens over 75 years, saw the budget permit them not to file returns, should their source of income only be pension and interest income.

The thrust of the budget was clearly on infra including roads, ports, power and real estate, which should go a long way in boosting growth. This is among the few reasons why the stock markets gave a big "thumbs-up" to the Union Budget 2021.