We see Budget 2020 as a near-term event, and longer-term/strategic asset allocations need to be guided by fundamentals researched by expert advisors.
Relief of tax burden for lower and middle-income groups, 100 percent exemption for sovereign wealth funds in infrastructure and other notified sectors were the main positives from Budget 2020, Sandeep Jethwani, Senior Managing Partner and Head of Advisory, IIFL Wealth and AMC said in an interview with Moneycontrol’s Kshitij Anand. Edited excerpts:
Q) What should be the portfolio strategy of investors post Budget 2020 sector-wise?
A) We see Budget 2020 as a near-term event, and longer-term/strategic asset allocations need to be guided by fundamentals researched by expert advisors.
We continue to maintain diversified investment portfolios with a preference for good fund managers investing in companies with strong fundamentals.
Diversified portfolios should be formulated in consultation with your investment advisor keeping in mind longer-term investment goals.
Sector allocation and preference would be a derivative based on portfolios maintained by shortlisted fund managers in an investor’s portfolio.
Q) What according to you qualifies as a ‘good, bad and ugly’ from Budget 2020?
A) The good includes Relief of tax burden for lower- and middle-income groups, 100 percent exemption for sovereign wealth funds in infrastructure and other notified sectors, the abolition of DDT, and the fact that the government continued to stick to the FRBM’s fiscal deficit goals.
The not so good factors were as follows:
No immediate relief to the real estate sector which has been in trouble for quite some time now. Major concerns have been a lack of liquidity and demand for real estate.
- No clear roadmap for Rs 2.1 lakh crore disinvestment target proposed for FY21.
- No mention of land and labour reforms which has been long overdue.
- No focused measures to immediately revive demand or provide liquidity support to NBFCs.
- Multiple tax regimes have made overall structure slightly complicated for a person not familiar with taxation.
- DDT in the hands of shareholders would be taxed in the highest bracket that is 43 percent.
Q) Should investors be worried about the coronavirus outbreak?
A) While this is an evolving global health issue, we believe in the medium to long term capital markets will refocus on the fundamentals of growth.
As individuals take all health precautions as advised by medical experts. As investors, carefully evaluate investment advice shared by your expert investment advisors.
Q) The abolition of DDT is a blessing for companies that are known to give rich dividends? Do MNC companies or cash-rich companies make the cut in that list? We have already seen some rally in those shares post the Budget? What are your top bets?
A) Though stock level selection would have to be evaluated on a portfolio basis, our house view maintains a preference for the large-cap oriented portfolio with selective exposure to mid-caps through thoroughly researched pockets of opportunities
• In hands of distributing company or AMC, the abolition of DDT would lead to lower outgo (as the tax does not need to be deducted) and better net profit reflected in their financials.
• In hands of the recipient, the abolition of DDT may be positive for retail investors who are at lower effective tax rates but at the HNI level, it may cause a net higher tax outgo on dividends as dividends would now be taxed at a maximum marginal rate of tax.
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