Budget 2015: Smaller Speech, Bigger Vision!

Smaller speech, bigger vision. This is the summary of Modi government’s first full year budget. Finance Minister kept his speech much shorter and meaningful this year compared to his last year’s budget speech where he said too much but of little use

Arun Jaitley may not have touched upon specific industry or sectors in his latest speech but laid a foundation or stepping stone for the future to unleash India Inc. Jaitley proposed numerous measures related to tax issues, ease of doing business in India, promote start-ups and SMEs, laws to curtail black money, additional funds for infrastructure and extension of social security benefits to the poor people of the country.

For common man, the Finance Minister delivered some goodies but not enough to rejoice them. Direct tax benefits like Increase in medical reimbursements, hike in limit under Section 80CCD by Rs 50000 and higher exemptions on travel allowance will partly get offset by increase in service tax rate from 12.36 percent to 14.28 percent. For corporates, the budget had a long-term vision. While the gross corporate taxes will go up this year due to increase in surcharge on corporate and individual taxes, the Finance Minister soothed India Inc with reduction in corporate tax rates from 30 percent to 25 percent with effect from FY16-17. This was one of the prime features of this budget – a step in the right direction of Modi’s Make In India vision. Setting up a fund to promote start-ups and easy credit for Medium and Small Medium Enterprises will add fuel to the country’s growth engine and creation of jobs in the longer term.

Infrastructure has always remained as one of the top agendas for India. With very little room for spending, FM launched a new fund for investment in infrastructure along with measures to raise money from tax free bonds for road, rail and irrigation projects.

In its constant endeavor to decode markets for retail investors, Heckyl prepared a budget e-book “Unleash India Inc” with a 360 degree snapshot of the budget and research views from some of India’s leading broking houses. It covers Budget Impact on market, stocks, sectors, common man’s wallet and India Inc’s businesses. The e-book also summarizes rail budget and economic survey. The e-book concludes with the verdict of the key brokerages views on Budget 2015.

Download Heckyl’s Budget ebook

Will rupee slide speed up FII selling of Indian shares?

Santosh Nair, Riken Mehta
Moneycontrol.com

Finance minister P Chidambaram Thursday tried to pacify jittery markets, saying foreign capital flows were strong enough to bridge the current account deficit. But will the flows sustain going forward?

Theoretically, a weak rupee provokes foreign funds into selling Indian equities, as it would lower their portfolio value, if the stocks have not been performing.

Assume a foreign fund buys one share of a company for Rs 52 when the rupee was 52 to the dollar. If the stock price remains constant, and the rupee depreciates to 57 to the dollar, the value of the portfolio is now less than 1 dollar. But if the stock had risen to Rs 62, the foreign fund would not be worried, since the appreciation could more than cover up for the weakness in the rupee.

India is among the emerging market countries which have gained from the low interest rate policies of the US Federal Reserve and the European Central Bank. Generous dollops of liquidity resulting from those policies found their way into Indian shares, keeping share prices higher even during periods of weakness in the rupee.

But now market is not so sure if the liquidity flows will sustain, as there are doubts that the Fed may now start cutting back on its monetary stimulus.

Since the big sell off in global markets a couple of weeks back on these concerns, foreign fund flows into India have slowed.

And there is bad news on the debt front as well. FIIs have net sold close to Rs 4000 crore of Indian debt as bond yields are softening in anticipation of a decline in interest rates.

If capital flows slow down at this stage, this could trigger a vicious cycle of weakening rupee and foreign fund outflows.