Tinkering with taxes for investors bad for mkts: Samir Arora

It was an okay budget where there were some good positives but quite a few confusing things and maybe some of them will be removed before the budget is passed by parliament, says Samir Arora, Founder & Fund Manager, Helios Capital. Excerpts from his interview with ETNOW.Would you say that the Budget missed out on doing anything to revive animal spirits or were you comforted by the fact that they managed to tow the line on the fisc?It was an okay budget where there were some good positives but quite a few confusing things and maybe some of them will be removed before the budget is passed by parliament. But in general, it will not change the market sentiment in the short term but overall it was better than what I thought before going into the budget.Perhaps the Budget was not too populist in that sense and the market seemed fairly disappointed with regards to the public shareholding norms as well as the tax on buybacks for example?There was some understanding of what is the problem with the NBFCs and a more directed approach towards it in terms of trying to turnaround the sentiment and differentiating between good and bad NFBCs and all which I thought was focussed and good. Second, there was a better understanding of the capital markets and how the world works in trying to beat the MSCI Index making committee because it is one of the most stupid committees the world gets influenced by. But then we have to follow it and understand it and so tinker with our own rules and this thing was just to get a higher weightage from foreign investors. So all that was good. Also, I do not believe that this overhang is there in any near term because the amounts are in the range of $40 billion and I cannot imagine that the regulator on their own would shoot the market down by forcing this to happen in a two-year period. It will be a 3-4 year period where you can expect some $10 billion on average over four years going into buying these stakes. I do not think that is an immediate overhang in that sense and on its own would get reversed quiet fast.On the NBFC front, in trying to come up with a package to ease the stress, they went the monetary way rather than the fiscal way. Is it going to be enough because there is no push when it comes to the private sector investment. Private sector borrowing seems to be crowded out and we do not see anything happening on that front. Are there major concerns on our economic growth?I did not like the budget, but there were a few positives and we were only talking about these two, three positives because I had even less expectations going into the budget. Overall, I do not think this will revive the market in the short term and that market will go on as it is but there might be more negatives. The first negative is that tinkering with taxes for foreign and even domestic investors. FPIs who are not formed as corporates now will have to pay a 22% short term capital gains tax even though the paper rate is 15% and they will have to pay some 14% long term capital gain tax although it is projected as having 10% rate. In this environment for anybody to expect that a foreign investor will pay 22% or 14% tax and still find Indian market attractive relative to other markets where he will pay zero tax, is unrealistic and unreasonable. But I hope that that can be turned around. The positive thing on fisc is if you keep the headline number disciplined and under control, that is not changing anybody’s mood to invest as far as direct investing is concerned. I also do not agree with the world that if you reduce interest rates suddenly, people will invest in Indian infrastructure. US rates have been near zero for long and nobody invests even in US infrastructure and as we know that they have not had any new real big infrastructure projects in the last 10, 20 years whatever be the rates. We also know how the capital markets shun infrastructure. The biggest stocks in the world currently are Apple or Google or Amazon. Where is an infrastructure company in the top 20 companies in the world or in India? Unless we build a confidence in the investor that when he puts money in infrastructure that along the way he will not be wiped out because of some change in policy, some fight with the government, some payments not being received in time, some arbitration fight, some local state government doing something and unless we have examples of successful infrastructure companies in India.

from Economic Times https://ift.tt/2G08qmJ