The key expectation from Budget 2023 is to maintain the growth trajectory while keeping the fiscal deficit and inflation under control Devarsh Vakil, Deputy Head of Retail Research, HDFC Securities, in an interview with mintjiniHe said that he is hopeful that there will be no tinkering with the capital gains tax. He predicted that the upcoming budget is likely to focus on defence, railways, capital goods, BFSI and rural sectors, while the infrastructure space will get a boost. Edited excerpts:
What should retail investors expect from the upcoming budget?
The upcoming Union Budget (on February 01) will be the last full-year budget of the Modi government before the Lok Sabha elections due in early 2024. The key expectation of Finance Minister Nirmala Sitharaman is to maintain the growth path while keeping the fiscal deficit in check. and control of inflation.
Do you see the government tinkering with capital gains tax in any way?
We hope that there will be no tinkering with the capital gains tax. However, the current and previous central governments have progressively increased taxes on the capital market.
What new announcement do you expect from this budget?
Outright support is coming to an end from the Covid period and will be ‘partially’ compensated with food subsidies, employment guarantees and higher allocations on rural infrastructure.
Eliminate double taxation on buybacks from the open market.
Widen the tax net without increasing compliance requirements.
Which sectors will be the focus in the budget? Will there be a boom in auto, banks?
The focus could be on Defence, Railways, Capital goods, BFSI and Rural sectors. Infrastructure will get a boost.
With CPI now under RBI bracket, do you see interest rates peaking in 2023?
Long-term interest rates may remain elevated for some more time till global interest rates peak and the pressure on the INR eases.
What are the hurdles India has to deal with in the first half of 2023?
The first half of the year (CY 2023) will see volatility due to a number of factors including moves by central banks in the fight against inflation, concerns about recession and news flows around geopolitics and the fight against Covid. In the second half of the year, stability can be seen in the stock markets and the rupee.
Amid global macro uncertainty and the ongoing rate hike cycle, do you recommend investors rebalance their portfolios? What should they add/subtract?
Stick to your asset allocation and systematic investment plans.
What trends should retail investors watch in 2023?
Finalization of savings is a long-term trend and is likely to increase further in 2023.
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