The Budget What do you do now ?

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It’s now been announced and is now beyond us. Immediately reacting on what the Finance Minister has done might not be productive. However, taking action based on the announcements surely would. And there are a lot of areas that one needs to take action on while managing your wealth.

One of the fears that every investor has is that of the extent of damage that the Budget can do. With the elections just around the corner, it was expected that there would be large scale handing out of goodies. In that sense, the overall reactions from industry experts is that the negatives are far less that expected and this is a populist-yet-pragmatic Budget.

From a wealth management perspective too this Budget held a lot of importance, as it had the potential of damaging any earlier plan which had a three to four year horizon. Your wealth management plan, while aimed at the real long-run, say a decade long, will also need to manage the medium term objectives. With the strong bull-run taking a breather, the fear that a bear-charge might start was very strong.

Churn less

With this Budget announcement, the chances of a bear-charge have lessened and the opportunity for Indian markets to continue on the growth path is intact. Hence, the good news is that a large scale portfolio allocation rejig within assets is not required at the moment. Equities are likely to remain in favour and therefore should have maximum allocation in your wealth management plan. You could manage the share of direct investing and equity mutual fund investing based on your risk profile.

Here, however, the strategy for operating in the market is clear – avoid short-term and play long-term. The increase in short-term gains tax to 15% is a sure deterrent and this should not be taken lightly. In a year where gains were extra-ordinary, the 15% tax would look small; however, one should consider the current setting.