What does the stock market expect from the upcoming budget?

ShareSansar, June 1:

The government is expected to introduce the budget for the new fiscal year within couple of weeks.

There are high expectations from the timely budget that, too, to being planned by a pro-government government after a long hiatus.

At the same time, there are concerns, too. Key stakeholders complain that no government till date has paid due attention for the growth of the stock market as well as to the benefits it could have on the overall economy.

Some stock analysts are also worried that we might as well end up with a depressed bull this time around if the government does not come up with measures to spur the banking and financial institutions, which covers around 80 percent of the total market capitalization.

The BFI sector faces challenges such as surplus liquidity and cap on spread rate. Addressing such challenges as well as clear timeframe for implementation of BASEL III can help fuel the scrip of BFIs if the market is to breach the previous high of 1175 level.

Strong commitment on full-fledged implementation of CDS, letting FIIs and NRNs to directly invest in the stock market and bringing in the real sector could be a few other measures.

Will the upcoming budget address these concerns?

There are indications that the budget will announce a few programs that could spur the market such as the replacement of capital gain tax with lower securities transaction tax and some tax exemption for mutual fund unit holders.

ShareSansar has caught up with some of the key actors in the stock market to feel their pulse in the run up to the budget.

Gyanendra Lal Pradhan, a leading investor and industrialist, says that it’s rather sad that none of the government so far has paid much attention to the share market or realized its benefits.

“Share market is a source of fund and can lead to development. We do not have to go far to see how the stock market has been contributing to holistic growth of the economy,” he adds. “We can easily see that in our neighboring countries.  It’s high time the government wake up to this reality.”

Another ways to spur the market, according to Pradhan, would be to bring more manufacturing companies so that the market is diversified. Currently investors do not have much choice other than BFIs, insurance, hydropower companies and hotels are.

“Paving the way to funnel remittance into the stock market would be yet another important step we expect from the government,” he further states.

Currently, migrant workers do not know what to do with their hard earned money. If they know there is profit in the share market then they could make good money and it would also contribute immensely for the growth of the stock market and the entire economy.

Stakeholders also stress on the need to sensitize not only migrant workers but people in general about the benefits that can be deprived from the stock market.

President of the Brokers’ Association Narendra Sijapati says that implementation of transaction tax instead of capital gain tax would not only significantly bring down the cost of fund for the investors and entail increased transactions, which would  fuel the market substantively.

He is also keeping his fingers crossed when it comes to the government’s plan to pave the way for direct NRN as well as FII investment in the stock market.

“If the government can ensure these and also gear up for the full-fledged CDS operation, it cannot get better than this,” he adds.

Punit Jain (broker # 43) is quite upbeat about the budget expected to be announced by the pro-market government by mid-June, as he believes that it would announce a number of measures such transaction tax, direct foreign investment to spur the market.

He is quite optimistic that the budget will come up with some really good news for the BFI sector, which has not been able to grow in the stock market despite the ongoing bull.

“Moreover, the banking sector itself is doing pretty good business when it comes to the core business,” he says, adding that with a little help from the government, the banking scrip should start to surge significantly.

Dilip Shrestha, one of the leading investors in the stock market, however, somewhat anxious that any decision by the government to raise the interest rate for the BFIs could be detrimental for the stock market, where the BFIs scrip amount to around 80 percent of the total market capitalization.

“We have high expectations from the upcoming budget, or at least we are hopeful that it would not hamper the market,” he says. “But whether the market will last not would depend on the interest rate. If the interest rate will increase then market will slowly fall and vice versa.”

An institutional investor, requesting anonymity, says that the timely budget  after many years was enough to propel economic activities and propel the stock market.

“Implementation of transaction tax, bringing in NRNs and FIIs would be like icing on the cake,” he says, adding that the market is expected to rise by more than 300 points in days ahead this year.

Bharat Ranabhat (Broker #35) also agrees.

“Currently the major issues are the policy for transaction cost and the foreign investment. If only these are ensured, the market would give to an unprecedented height,” he says.  “Though we also expect more good news through the budget, the market is, nonetheless, poised to rise further on the basis of performance of the listed companies.”