Tweaks to capital gains tax unlikely this Budget, 2023 to offer better returns, says market veteran Samir Arora

Samir Arora, Founder at Helios Capital, says he does not see tweaking of capital gains tax this coming Budget and that 2023 should be a better year for domestic stocks than the one gone by.  

Speaking at the maiden BT Market Today Summit, Arora told BT's Global Business Editor Udayan Mukherjee that he does not believe there are louder noises this time about changes in capital gains tax and that if the Budget gives the topic a miss, it would be considered a 'good Budget'.

Explaining it further, Arora noted that it would be a waste of an opportunity for a market like India, which seeks foreign flows, as nowhere in the world does foreign investors pay taxes on equity investments. He gave an example of the US, where the only tax that is levied is on dividends.

"If GST tax collections and overall revenues are all up, why do we need one more avenue to raise extra resources," he asked.  

Arora said 2023 will be a better year than 2022 for stocks and that the year of Rabbit (zodiac sign, Chinese year) will help investors more than what the year of Tiger (zodiac sign, Chinese year) did last year. He noted that the US market ending lower for two straight years has been rare. In the last 25-27 years, it happened only once. In last 100 years, US stocks fell for two consecutive years for just four times, he said.

The market veteran said last year saw FPI selling domestic stocks worth $28 billion in the first six months, which was largely due to non-India reasons. India did not do anything 'exceptionally bad' last in the first six months last year, he said.  

Arora said two external factors -- US markets and Fed interest rates and China and its policies, have gone past the negativity in some sense and both the market will be flat or higher.

"To rebalance China, it seems that FPIs are pulling out money from India. Flows are positive in China, Taiwan and Korea, and not in India. That is a bit of rebalance that I did not imagine. Such a rebalance should not last long. If US and China markets are okay, our external thing is positive-to-flat, and we can move on in life," Arora said.

Arora said India market performing better than China was not the reason behind the domestic market weakness. Domestic stocks, in fact delivered flat return in 2022, but China performed badly due issues that hurt investors and those issues cannot be forgotten easily.

"In the first round, people are playing the China rebound. A few months, new allocations to China in percentage terms would not be the same. It is just a one-year story, a few weeks plus or minus," Arora said.

Arora said in every six to seven years, there is one bad year for the market that takes away the returns of the last couple of years' of returns. The US Fed may be keeping rates for some time, maybe by end of the year, he said adding that one may see US Fed trimming rates and global markets relishing by the year-end.

Arora was speaking on the topic "The Year of Comeback or Deeper Malaise".

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