At 11:57 AM, State Bank of India nosedived to Rs 1,954, by about 3 per cent, as the Finance Minister announced a loan waiver to the tune of Rs 50,000 crore for farmers.
In other words, for stock investors over the long haul, there’s no reason to worry. Agrees Pradeep Dokania, Head (Global Private Clients Business), DSP Merrill Lynch: “Even if the GDP growth comes down a little, equities can grow by 15 per cent. If anything, we may need to lower our expectations from equities.” Corporate India’s profits are growing at a steady pace.
And further rationalisation of excise duties by the FM is positive. Over the long term, investors may find attractive values in select automobiles, engineering, construction companies.The Finance Minister has not changed your investment landscape too much.
|Where to invest now?|
More Investment Options One piece of good news for investors is the increase in investment options under section 80C. Chidambaram has allowed investments in the five-year Post Office Time Deposit and the Senior Citizen Savings Scheme eligible for 80C tax deduction.
Chidambaram also announced that the soon-to-belaunched Rural Bonds would be under the same tax purview. After factoring in the income tax deduction, these investments will look more attractive.
But chances are that investors could see their unit-linked insurance plan (ULIP) investments turn a tad expensive.
The Finance Minister levied a service tax on asset management companies that manage ULIP funds. With the move, ULIPs business of insurance companies and the mutual funds now stand at par. Says Ranjeet Mudholkar, CEO, Financial Planning Standards Board India: “People should get sensitive to the difference between ULIPs and mutual funds. They will have to look at their investments prudently.”
Meanwhile, commodity investors will be disappointed with the new Commodities Transaction Tax that comes into effect from April 1, 2008.
This could deter commodity investors, as the Finance Minister has not implemented long- and short-term capital gains laws for the commodity investors on the same lines as they are currently applicable to stock investors. This will make commodity investing less attractive.
But if there’s any major message the Budget has for investors, it’s this: invest for the long-term. Says Mudholkar: “Don’t let speculation govern you. There has been a tendency among investors to play the short term.” After all, the FM’s underlying message is no different.