D-Street experts give 2.5 out of 5 for FM Nirmala Sitharaman's Budget 2020

Finance Minister Nirmala Sitharaman’s Union Budget 2020-21 lacked the animal spirit which D-Street investors’ were looking for to help Asia’s third-largest economy get back onto a growth path.

Most D-Street experts gave thumbs down, by giving the Budget an average rating of about 2.5 out of 5.

D-Street gave a thumbs down to Budget 2020 as Sensex crashed by about 1,000 points while the Nifty50 saw a drop of over 300 points — posting their single biggest single-day fall in nearly 5 years.

The expectations were running high in the run-up to the Budget, which pushed the benchmark indices to record highs. The S&P BSE Sensex hit a record high above 42,000 while Nifty50 climbed above 12,400 levels.

But, the policies tabled by the finance minister were not exciting enough for D-Street, as it lacked significant measure to stimulate demand and did not provide any relief on capital gains tax which was widely expected.

The fiscal deficit number was largely in-line with market expectations but the plan to reduce the fiscal deficit for the next financial year by LIC IPO was something which shook investors’ confidence, experts suggest.

Gaurav Garg, Head of Research, CapitalVia Global Research who gave two out of five to Union Budget 2020 said that it was a mixed bag as there was no major big bang reform while the expectation was very high as this is first full-time Budget of Modi 2.0.

“We were hoping for deduction allowed u/s 80C to be increased but there was no direct announcement. The Budget lacked stimulus for growth and the government’s plan of action to reduce the fiscal deficit, which shook investors’ confidence,” he said.

Personal income taxes which are being cut, do not make a substantial difference to consumption, the rich tax which has essentially with surcharges brought the effective tax rates to 42 percent for the highest bracket continues to be a big deterrent to consumption, experts suggest.

Amid expectations of a possible tweak in the long term capital gains tax or LTCG as well as Security Transaction Tax (STT) was not touched by the finance minister in the Union Budget 2020 which played a spoiler for D-Street as well.

“I would rate it at 2 out of 5, the economy needed stimulus, this budget can be summarized with the word hogwash, and nothing effectively changed. Nothing substantial seems to have changed, for the government to expect a 10 percent nominal GDP growth rate continues to sound like hubris,” Nikhil Kamath, Co-founder, Zerodha & True Beacon told Moneycontrol.

“The situation on the ground is a lot worse, the need of the hour might be to recognize the issues at hand and transparently deal with them. Personal income taxes being cut do not make a substantial difference to consumption,” he said.

Kamath further added that no word on a reduction in long term capital gains will push foreign capital to similar geographies in South East Asia, which do not tax long-term capital gains.

“We also didn't hear anything about Security transactions tax as STT continues to be the biggest deterrent in making our stock markets robust by adding a significant barrier to transacting frequently and thus increasing the impact cost around trading equities,” he said.

Amit Gupta, Co-Founder and CEO, TradingBells told Moneycontrol that it was not a bad Budget, but not a Budget that can cheer the market and boost economic sentiment immediately because there were high expectations from the it to boost the economy as the prime minister was very active while preparing Budget 2020.

“No change in LTCG was another big disappointment for the market. We will rate this budget with a rating of 2.5 out of 5,” he said.

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