Dalal Street has never been the same after the ‘dream’ Budget of 2001. Investors and punters who had taken a massive hit in the market collapse in March 2001 are still nursing their wounds. They were cautious last year (2002) also.Things are not different this year as well. There are expectations, but the once-bitten-twice shy markets are circumspect. With the Middle East tensions now adding to their cup of woes, investors have nothing much to cheer about. Dalal Street is yet to see a major pre-Budget rally. And Sensex is now hovering around the 3,300 level. This is 250 points lower when compared to the Sensex level on the same day of last year. And a year before, it had hit 6,150 in February 2001.“There are so many uncertainties. Even Budget is proving to be another one. The Gulf crisis is now creating nervousness,” said stock dealer R.A. Podar. Despite the sombre mood in the market-place, the wish-list is long, as usual.Says Sanjiv Roy, CEO, Birla Sun Life Distribution, “Markets are expecting the government to steer clear of controversies and implement market-friendly proposals in the report.” Abolition of dividend tax and reduction in corporate tax are two common demands of market experts.“Making dividends from equity funds tax-free will boost investor interest in equity funds. Moreover, to incentivise investment in equity, the government could look towards increasing the limits in equity-linked saving schemes schemes which will ensure that long-term money comes into the funds and the market as well,” said R. Sukumar, chief investment officer (equity) of Franklin Templeton Investments.“Abolition of tax on dividends would end the double taxation on dividend income and investments in equity shares would become a more attractive investment option. Further, withdrawal of long-term capital gains tax on listed equities would make equity investments more attractive and help create a healthy long-term investment trend,” Roy said.Other demands include increase in exemption limit for personal income tax from the present level of Rs 50,000 as it would mean a lesser tax burden on individuals. This will lead to higher disposable income and freedom of asset allocation.Small investors are the hardest hit in the market. “Tax sops for individual investors should be continued. For example, standard deduction should continue for salaried people; section 80 L and section 88 benefits should continue,” Roy said.Analysts also feel a cut in interest on small savings investments would give a boost to other investment avenues like equities and mutual funds. “This will be a fillip to both the market and investors alike. Investors would begin to understand market risks and enjoy higher liquidity and returns. Debt funds would gather confidence from this move and render higher returns to investors in these funds,” said an analyst.Says Crisil’s pre-Budget study, ‘despite the lack of interaction (with the Finance Minister), the current Budget is expected to be populist, loaded with tax cuts and other sops for the common man. A cut in long-term capital gains tax is also expected. This cut would be very beneficial for the capital market as it would mean more inflows for mutual funds. The government is also expected to scrap the dividend tax. This would be very positive for the equity market. and boost the investor sentiment’.But the expectations are muted this time. The Bombay Stock Exchange even stopped the practice of making pre-Budget demands. The 2001 Budget and the subsequent developments have taught investors a good lesson.
