Budget 2013: What do markets want?

Feb 25 2013, 16:31 IST
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SummaryBudget should reduce subsidies, raise taxes and go big on job generation and infrastructure investment.

corporate and institutions to be able to invest in capital projects, infrastructure and social sectors. Only if this happens will begin the next consumption cycle; a bigger and better one.

Consumers do not have to worry about deferred purchase of a car or a house or the inability to shop much. Incidentally, when you find it increasingly difficult to consume, is the best time to invest. That’s why 2005-2008 was the best time to make money in stocks, and 2009-2011 was the best time to consume when markets didn’t do much.

I expect the budget to continue to make it difficult to consume; simultaneously improve the government’s fisc by reducing subsidies and raising taxes and go big on encouraging employment generation and investment in infrastructure and social sectors like health and education. If this plays out; one can expect the market to show us the next big boom. But for that, one needs to be invested in stocks first—either directly or through mutual funds.

The writer is CEO,Motilal Oswal AMC

Broaden tax base, improve quality of public expenditure

It may do wonders if the government increases the spend on education and revives investments

I V Subramaniam

A decade or two ago, the budget was an important event for traders or speculators as it allowed them to trade significantly as announcements came in. Fortunes were made or lost, on this day as bets were placed on predicting which companies would do well or which industrial families would do well based on their connections with those in power. Newspapers reports suggested that lobbying, influencing the government or the ministry seeking benefits were common. Competition was killed and competitive wars were fought through budgets. Any increase in indirect taxes had a huge influence on the fortunes of companies, and often it was rumoured that business houses would influence the government to raise indirect taxes for competing products or competitors. Similarly making imports cheaper was a tactic often used to kill competition.

Speculation as to which group or industries would benefit offered huge opportunities for investors to trade in a stock or group of stocks.

In the late 1990s, with the alignment of indirect taxes into a few simple rates as opposed to the myriad different rate slabs we had earlier and reforms to reduce the cascading affect of taxes on raw materials, the chances of speculating have reduced. The budget therefore was an important financial event to look forward

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