Budget 2018: After Finance Minister Arun Jaitley introduced LTCG tax on equities in Union Budget 2018, leading to a negative sentiment in the stock markets, Rashesh Shah of Edelweiss Securities says that the investors should not get too perturbed by it. “I think the LTCG is a very small part of the overall budget, which has been very balanced and looked at the overall needs of the economy. There’s a global event, the markets were also over-extended. The investors should not get too perturbed,” Rashesh Shah told ET Now in an interview.
On similar lines, Finance Secretary Hasmukh Adhia says that the stock market correction is not because of the introduction of LTCG tax. “Markets are down, because global markets have gone down,” Hasmukh Adhia said, adding that its unfortunate that the move came when the global markets are in turmoil.
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In the same interview with ET Now, Rashesh Shah said that equities remain attractive despite the imposition of LTCG tax. “We do believe that the equity markets give 15-16% of annualised return over the long term. If you pay 10% of that, it comes to only 1.5% of your 15% return.” Further, the expert said that the investors should take a very balanced and pragmatic approach, as we have had STT in the past too, and LTCG is just another tax.
Alok Singh, Chief Investment Officer, BOI AXA Mutual Fund told FE Online that despite some disappointment, equities remain an attractive investment proposition. Alok Singh noted that there is some disappointment as the government has reintroduced LTCG, while retaining the STT (Securities Transaction Tax). Notably, the government had introduced STT in 2004, after introducing the LTCG exemption.
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Explaining why equities remain an attractive alternative despite the change, Alok Singh said, “Historically, equity has delivered better returns. Even after the introduction of LTCG equities remain attractive. Equities are one of the only asset classes where you can expect double digit returns. Further, the fact that previous gains made till 31st January will be grandfathered will come as a relief to investors,” the expert said adding the move will not induce any negative sentiment as investors are likely to stay invested for want of better opportunities.