Bring out big bang reforms to boost growth: Experts
| Date :20-Sep-2019 |
Business Bureau :
After the announcement of the Budget on July 4, the stock markets mainly Sensex and Nifty have been dragged down due to massive selling pressure exerted by foreign portfolio investors (FPIs). Foreign and domestic investors were expecting big bang reforms which did not come out which eroded investor sentiment. On top of this, global factors like US and China trade war, slowdown in world economy, high tax rates, falling GDP growth and uncertainty over oil supplies due to attach on Saudi Arabia’s oil fields have also dampened investor sentiments. “Government needs to introduce bold reforms to boost economic demand,” said CA Kailash Jogani.
He said, “Government had slapped surcharge on investments of foreign portfolio investors (FPIs) and high net individuals (HNIs). Ever since then, FPIs have been net sellers in the market. Afterwards, it rolled back surcharge on FPIs, but it has been too late and the damage had been done.” The Government needs to take steps in the right direction and set things right. Government needs to fulfill expectations of trade and industry. It needs to step up spending in a big way on infrastructure projects immediately to bring in some liquidity in the economy. Only lowering GST will not help boost demand. There are other issues which need urgent attention, he said.
Some of the steps Government should take is lowering Corporate Tax to 25 per cent from 35 per cent, reduce dividend distribution tax, abolish security transaction tax (STT) and roll back long term capital gain (LTCG) tax after one year, he pointed out. Apart from this, the Government announced to initiate criminal proceedings against corporates for non compliance of corporate social responsibility (CSR) spending. Later, it retraced and said that only civil proceedings will be there. Furthermore, there was the announcement to bring down promoter holdings in listed companies to 60 per cent. Promoters holding more than 60 per cent started selling their stake to meet the new norms.
For corporates, it would be difficult to absorb such high tax rates and survive with such conditions imposed on them, Jogani said. RBI is doing its part to infuse liquidity in the market but in the absence of demand there is no credit off take, he said. Nifty has dropped by 1,300 point from its highs over a period of two and half months. Further fall is expected in the Nifty from the current level of 10,700. He predicts the Nifty to be in range of 10,300 and 11,300. If proper steps are taken, after Diwali the markets could easily rally to 11,300 level, he said. He has advised investors to invest through systematic investment plan (SIP) route or buy shares of fundamentally good companies as the valuations are attractive at these levels, he added. CA Julfesh Shah, market analyst said that the market sentiments seemed to be going down further and investors wealth getting eroded by Rs 1.65 lakh crore as equities face heavy sell-off. The market is not satisfied with the stimulus packages announced by the Government and the liquidity ease is not yet satisfactory. Market assumes that the downside in economy will continue until supported by fiscal stimulus in India.
He has advised investors to be cautious in approach and apply due diligence before taking a call about any particular scrip. According to Bloomberg & CNBC Awaaz guest expert CA Nirav Panchmatia, one should never waste a crisis. Good news and good share prices rarely go together. Indian equity market is showing extreme volatility because of various factors mainly slowdown in the economy, NBFC crisis, corporate bankruptcies etc., which might continue for a few more quarters. In such a scenario stock markets are bound to be volatile, said Panchmatia who is also Founder CEO of AUM Financial Advisors. The best approach in such time for all investors is to not commit money immediately, but invest systematically via SIP and STP route. SIPs and STPs are designed to take advantage of falling and volatile markets.
The positive side is that the shares of good quality companies were never so cheap especially midcaps and smallcaps which are available at very attractive valuations. Investments made at these prices are likely to fetch very high returns over next 3 years, said Panchmatia. He also said that amateur investors should refrain from investing directly in share market and invest via the mutual funds route only. They should also avoid investing in lower quality and penny stocks. Anuj Badjate of Badjate Stock & Shares Pvt Ltd said that the Indian economy is going through a bad phase. Getting credit is one of the biggest problems trade and industry is facing. Government talks about job creation but is not thinking about job creators. Due to the slowdown in the economy and other factors investors are feeling unsecure. He said, the markets will fall further down. He advises investors with horizon of more than three years to invest to reap rich dividends or buy in phase manner.