ETMarkets Smart Talk: The govt could simplify the structure of capital gains tax regime in Budget 2023: Jaideep Hansraj

“It is expected that the government will try to simplify the structure of the capital gains tax regime. There can be income tax relief for individuals in higher tax slabs to increase their purchasing power,” says Jaideep Hansraj, MD & CEO – Kotak Securities.

In an interview with ETMarkets, Hansraj said: “Emerging Themes could be defence, Infrastructure, Capital Goods & Engg, discretionary consumption, BFSI and Fintech,” Edited excerpts:
How do you see the Indian economy faring against the globe in 2023?
India’s macro prospects are likely to be punctuated by a global demand slowdown along with the overhang of geopolitics.

(Tax breaks, jobs or plan to beat China: What will Budget 2023 offer? Click to know)While the domestic economy follows a middling path, risks of negative surprises will persist. We expect moderate growth, stable but relatively elevated inflation, steady interest rates, and a volatile INR to mark India’s macro profile.

We expect the Indian GDP to grow at 6.8% in FY23 and 6% in FY24. While other EM economies are expected to grow at slower pace. Also, there is fear of recession in DM. Based on strong economic parameters, we expect the outperformance of Indian Markets to hold going forward.

We are already at record highs in December 2022. Do you see the bull run continuing or we could see some consolidation probably post the Budget?

The US Fed raised its projections for interest rates and expects to keep them high until H1CY24, given the tight labor markets, despite the visible weakening of inflation.

This in line with our view of higher-for-longer interest rates (high ‘plateau’) over the next several months. The US Fed’s hawkish stance may dash the hopes of global markets about a quick pivot to lower interest rates. The Indian market’s rich valuations still seem to be stuck in a low-interest rate world.

We expect a significant de-rating of multiples over time, as the market reluctantly reconciles to ‘higher-for-longer’ interest rates over time.
Additionally, we see risk to growth expectations, given ongoing growth headwinds (high fiscal deficit, large Covid-19 impact on low-income households). Hence, we could see some consolidation in the markets.


How does valuation stack up for Indian markets?


We estimate NIFTY EPS at 816, 950 and 1101 for FY23E, FY24E and FY25E, which shows a growth of 10.8%, 16.3% and 15.5% for FY23, FY24 and FY25 respectively. At 18610, Nifty- 50 index is trading at a PE of 22.8x FY23E, 19.6x on FY24E and 16.9x on FY25E.

Indian economy should be supported by favourable policy environment, impact of PLI schemes, opportunities arising from shift of global supply chain, Government thrust on infrastructure spending, etc. Further, conditions for private sector capex remains conducive given the low corporate leverage, rising capacity utilization, broad based improvement in profitability and robust balance sheet of banking sector.

FIIs have started to come back to India but given the fact that we might be trading at a premium valuation – do you see money moving toward others global markets?

Recent data for November and December 2022 showed that foreign investors turned positive and emerged as net buyers as investors are expecting a moderation in the pace of rate hikes and the loosening of Covid-19 restrictions in China.

Out of their net purchase of Rs 36,239 crore last month, Rs 30,682 crore were in just six sectors, and in that financials alone attracted 14,000 crores.

India has always traded at a premium to all other emerging markets and would continue to trade at a premium valuation due to strong growth, controlled inflation, and a stable business and political environment. We do not feel money moving toward others global markets

Which are the key themes that investors should watch out for in 2023?

Emerging Themes could be defence, Infrastructure, Capital Goods & Engg, discretionary consumption, BFSI and Fintech.

Post-Christmas markets will get into a mood of Budget 2023 – do you see a more populist Budget as it is the last year before India goes to poll?

As we approach the Union Budget for the financial year 2023-24, the market is abuzz with expectations that the government will continue with its infrastructure and CAPEX push to boost medium-term growth.

Many industry associations including Aviation, Automobiles, and real estate are seeking a cut in taxes to boost consumption as well as sector-specific support in the upcoming Union Budget.

The union budget of 2023, is likely to increase private interest in infrastructure projects implemented on PPP basis as it would facilitate the availability of long-term and cost-effective financing from financial institutions.

It is expected that the government will try to simplify the structure of the capital gains tax regime. There can be income tax relief for individuals in higher tax slabs to increase their purchasing power.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)



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