Hectic trading to be seen on Budget day, exchanges to remain open on Saturday

The Narendra Modi government has advanced the date of the Budget from last working day to first working day. Stock markets usually remain closed on Saturdays and Sundays. But in 2015, when the then Finance Minister Arun Jaitley presented the Budget on a Saturday, exchanges were kept open for regular trading hours.

So on February 1, the exchanges would be kept open in spite of the day being a Saturday.

This year's Budget is seen to be crucial considering the sagging economy with the GDP sliding to six year low in the July-September quarter.

Financial sector and capital markets representatives have submitted several suggestions in their pre-budget interaction with the finance minister to revive the economy.

Indian equities market under-performed its global peers in 2019, as consumption slowdown, coupled with liquidity constraint and rising inflation roiled investor sentiments.

Although the government has cut the corporate tax rate and taken some other steps, the markets expect more such measures.

Dalal Street expects the finance minister to cut the personal income tax, restructure the Securities Transaction Tax (STT), and announce positive measures for industries, schemes for rural market to boost consumption, and steps to implement the next phase of Direct Benefit Transfer (DBT).

KPMG in India said its pre-Budget Survey indicated that rate-cuts for individuals was the most wanted item for everyone. "This is in line with expectations that lower tax rates for individuals, along with the corporate tax rate cuts enacted last year, will boost spending and investment in the economy," it said.

The finance minister is also expected to roll back the long-term capital gains (LTCG) tax on listed securities and the dividend distribution tax (DDT) to boost confidence in the markets.

The LTCG was introduced in the 2018 Budget after more than a decade with a tax of 10 per cent on an amount above Rs 1 lakh. The tax reduced the returns investors earn from their investment in equities.

Big bull Rakesh Jhunjhunwala says that the duration of long-term capital gains tax should be extended to two years, but tax on dividends is undesirable and unjustified.

Sector-specific sops are also hoping for some relief for segments like agriculture, housing finance, auto, infra and realty.

Jhunjhunwala thinks that the government must make investing in real estate tax-free.

The market saw profit-booking and consolidation ahead of the Budget after hitting a record high. This indicates that caution is now the watchword for investors and traders. If the Budget fails to match the expectations, expect a sharp sell-off.