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.

Unless something extraordinary happens, this year is not going to provide phenomenal returns like the ones witnessed in the previous years. Corporate earnings are strong, but the overall global scenario looks bleak and therefore, exuberant foreign and institutional purchases are likely to be lower. And while domestic institutions are expected to provide support, the huge rallies may well be missing. The finance ministry, in its Economic Survey, also mentioned that the Indian stock market was amongst the expensive ones and the volatility experienced in the previous year was amongst the highest ever.

This clearly indicates the high risk the market runs at the moment. With returns not expected to be as handsome and volatility likely to remain the order of the day, trading with a 15% short term gains tax would be extremely risky.

Then again, the stock exchanges have come under the purview of service tax and this will have to be accounted for. Though early days at the moment, it is likely that the exchanges will pass these down to their members and they, in turn, to investors.

While trading itself is a valid business practice, financial planners cry hoarse over the need to keep it separate from wealth management. The two are different and, when diffused, cause a lot of personal turmoil and anguish. If you are still bitten by the trading bug, keep some amount aside for trading purposes.

?An amount you would be okay with in losing, if you lost it all,? says Sanjay Gupta, a financial planner and chartered accountant.

Stick to knitting

One of the cues that one can take from the Union Budget is that the government, while playing to the gallery, is also keen to spur growth in the economy. This can be witnessed by stronger allocation to the infrastructure industries and a bold decision to stick to their knitting and keep a focus on maintaining strong revenue growth.

It would indeed have been tempting for the finance minister to extend his performance and also please the corporates by lowering the tax there, and he refrained.

Instead, moves to impact consumption — by lowering excise duties and thereby stimulating demand and also the economy along with it — were taken. The increasing of spending power with individuals is expected to ensure this.

Therefore, investment strategies will be based on these parameters. Companies in the infrastructure and related industries are likely to be strong gainers this year. And so will be those which deliver on the consumer spending story. These stocks are expected to dominate portfolio share. The banking sector too could witness strong traction in the current year.

This year is expected to mark the comeback of the FMCG sector in a big way. And these stocks, defensive by nature, provide strong portfolio participation in uncertain times such as these. Another defensive sector, pharmaceuticals, is expected to gain tremendously from the policy announcements. And will have to get an increased share of the portfolio.

However, certain financial services companies, largely reliant on investment banking income and brokerage incomes, are expected to see a year of weakness, reckon experts. Experts reckon the need to be extremely selective with real estate stocks, as they tend to be extremely volatile.

Ulip service

In case you are a fan of unit-linked plans, then this would be a year to reconsider the extent of their presence in your portfolio. Earlier, unit linked plans or Ulip asset managers would charge a measly fee from investors, largely because they managed large corpuses. But now with the implication of the service tax of around 12.3%, the service charges are likely to go higher and the companies would definitely pass these on to the investors.

Ranjeet Mudholkar, CEO, Financial Planning Standards Board of India reckons, ?An average investor maintaining a nominal fund of Rs 10 lakh under these policies for average 25 years, paying an average 1.5% asset management fee will have to suffer an extra burden of Rs 1,854 on account of service tax on this fee which will result into a reduction of almost Rs 2.40 lakh into end result of his investment assuming a growth rate of 12% in Ulip policies after 25 years.?

This might prompt you to look at other avenues. Here, the fixed maturity plans or FMPs, which by virtue of receiving indexation benefits, remains extremely tax efficient and these should be included in the portfolio, especially when the direction of interest rates too looks uncertain. FMPs bring in some amount of certainty and also liquidity to the portfolio, reckons K Ramnathan, head of fixed income with ING Vysya Asset Management.

And liquidity will remain the key…

Every year, experts have been known to predict gloom in the Indian markets and every year, for the past three years, they have been proved wrong. Chances of this happening this year as well cannot be ruled out. And therefore, it would be prudent to maintain an increase portfolio share in liquid assets. Short term liquid funds and money market funds will always be preferred in such a scenario.

The minister has announced the deepening of the debt market and this should create exciting avenues, but there is time still for that to happen. For the moment, long term bonds and mutual fund based issuances could be preferred.

Experts, however, reckon that having a 5% to 10% allocation in gold and gold-based exchange traded funds would be a smart move, considering the pressure on inflation due to high oil prices. Strong oil prices and a weakening dollar, as is being witnessed now, are known to spur gold prices. These are anyway ruling at historically high levels at the moment.

Commodities, especially agri-commodities and select metals, are expected to perform extremely well in the coming years. The wheat shortage and rising price issue is escalating around the globe and is on the radar for most commodity traders. However, with the introduction of commodity transaction tax, frequent churning and excessive trading will become expensive and is avoidable. Taking a three- to six-month view on commodities and then reducing the extent of trading could be just what the doctor prescribed.

Another clear prescription is to avoid trading and short-term speculation. The days of quick gains are over. It?s return of the wealth management discipline.