The Hindu Business Line : `No change in STT is positive'

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Hyderabad Feb. 28 The Chairman of Karvy Group, the country's leading stock broking firm, Mr C. Parthasarathy, said: "From a capital market perspective, let me focus on the positives of the Union Budget first.''

The decision to maintain the levels of capital gains tax, securities transaction tax and service tax at the same levels was a pleasant surprise, since they were expected to be raised. However, the decision to raise the dividend distribution tax on dividends paid could be a dampener.

The Finance Minister also made two announcements which could have a long-term impact on capital markets. The preparation of a road map for permitting institutions to short sell in the market could bring about the much needed breadth and depth in capital markets.

It could also pave the way for the development of a vibrant stock lending and borrowing mechanism, and at the same time facilitate actual delivery against futures and options at a later date. These would not only lead to greater institutionalisation of the markets but also reduce the volatility in the market place, Mr Parthasarathy said.

The second announcement with far-reaching implications would be to permit corporates to issue exchangeable bonds against their holdings in group companies which could unlock a lot of value, he added.

The two debatable issues in the budget have been the change in the excise duty structure for cement companies and the extension of MAT (Minimum Alternative Tax) to IT companies, which could have an immediate impact.

In a nutshell, it is been as a budget that has tried to address some fundamental macro economic issues like inflation control without retarding the growth engine. It can be viewed as a neutral budget which is not surprising considering the fact that we are just above two years away from general elections, he said.