'Band-aid response to middle class': Shankar Sharma's take on Budget, FII selling & more

In an exclusive interaction with Business Today on Saturday, ace investor Shankar Sharma spoke at length about the Union Budget 2025 presentation, foreign institutional investor (FII) sell-off, Reserve Bank of India (RBI) rate and the market outlook. "In my view, I would call it (Budget) a band-aid response to the middle-class cry for lower taxation. Beyond that, it does not do anything to address the core problem, which is a growth slowdown. I think the full-year GDP (gross domestic product) number would be closer to 6 per cent or a tad lower," he stated.

In response to a query on the ongoing market correction, the market expert said, "The Centre should have at least removed STT (securities transaction tax). When STT was introduced, LTCG (long-term capital gain) was removed. Now we've got LTCG back in 2018, we got it hiked in the July Budget and STT was never reduced or removed. I should have been removed."

Sharma highlighted that India is one of the worst-performing markets on a previous 12-month basis from being one of the best in the period prior to that. "Look at FPI pullouts. In January, we have lost around Rs 1 lakh crore. The reason why they are going is that post-tax returns from India no longer justify being in India if you are a portfolio investor," he added.

"I invest globally. I pay zero capital gains tax anywhere. I only pay tax on dividend, which is minuscule. Nowhere in the world you get taxed on capital gains except India," the market veteran further stated.

Sharing the market outlook, Sharma said he would be even more selective as it is no longer a broad bull market adding that it is going to become a narrow bull market where you do make money but it takes a lot more effort.

Commenting on RBI's expected rate cut, he suggested that India can not afford a rate cut from a monetary standpoint because the Indian currency is been weak.

"The rupee has been depreciating due to FPI pullout and other pressure points. All of these things do not merit a rate cut because if you cut the rates, you are going to further decelerate the attractiveness of India as higher rates are required to bring in capital. If you cut rates, capital will not come in or it might even begin to flow out even more. I think it is a rock and hard place situation for the RBI," Sharma stated.