The Hindu Business Line : `Level playing field for domestic players vs FIIs'

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Chennai March 1 The stock markets, for the last week, have generally been negative with fears of increase in short-term capital gains tax as also securities transaction tax. The Finance Minister has been kind enough to not tinker with these rates and maintain continuity, according to Mr Krishna Kumar Karwa, Managing Director, Emkay Share & Stock Brokers Ltd.

However, the increase in corporate dividend distribution tax from 12.5 per cent to 15 per cent was a negative surprise and may affect sentiment temporarily. The increase in dividend distribution tax for money market mutual funds from 12.5 per cent to 25 per cent was a smart move to plug the tax arbitrage between bank deposits and debt mutual funds, he said.

The provision to allow domestic institutions to undertake delivery-based short selling and have a system for stock borrowing and lending would be a significant step when implemented. This would improve the depth of the capital markets as also enable a more level playing field for domestic institutions vis a vis FIIs.

Excise duty on cement

The increase in excise duty on cement from Rs 400 per tonne to Rs 600 per tonne for cement sales above Rs 190 per bag is not expected to control the rising prices — basic economics of demand and supply will overrule everything else, according to Mr Karwa.

Cement stocks were anyway weak in anticipation of some budget initiatives and should recover in the medium term. Minimum alternative tax on IT companies would be forgotten in a few days. The growth and opportunity in the IT sector was too good for capital markets to ignore, he said. Capital markets wouldcontinue to respond to global liquidity flows in the immediate run and to fundamentals in the longer run. Large IT companies and cement companies should be decent investment opportunities in the medium term, he said.

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