Markets ‘not expensive’ at current levels

KR Srivats New Delhi | Updated on January 10, 2020 Published on January 09, 2020

Raamdeo Agrawal, Chairman, Motilal Oswal Asset Management Company,

DDT reforms in Budget to spur capital allocation: Raamdeo Agrawal, Motilal Oswal

Indian equity markets are “not expensive” at current levels and new bold measures including reforming the dividend distribution tax (DDT) regime in the upcoming Budget could propel Indian corporates’ capital allocation in the economy, said Raamdeo Agrawal, Co-Founder, Motilal Oswal Financial Services.

“We have to create an environment where corporates — they earn and flush it out — deploy back their earnings into the economy. Wherever you do coercive taxation such as DDT, it will have negative effect. So, DDT should be reformed,” Agrawal told BusinessLine.

At the same time, Agrawal said he was not pitching for lower taxes through the removal of DDT. “I am not looking to reduce my tax payout by a single penny. All that I am saying is instead of DDT, look at an alternate effective tax mechanism that would encourage corporates to flush their earnings out and deploy the money lying in their balance sheets in new ventures in the economy. Currently, there is no efficiency in the payouts because of DDT.”

Agrawal felt that bringing back dividend taxation at the hands of the shareholders could be a better option.

Agrawal sees the automobile sector — which had a disappointing 2019 — making a ‘huge comeback’ as the economy will slowly recover this calendar year.

“My sense is post March we should see better traction in the economy and the government has already realised the need to focus on the economy.

I am not saying don’t do politics. All that I am saying is don’t do politics at the cost of economics. It has to be remembered that good economics is good politics. Good economics is extremely important for the poor. If growth in the economy comes down, the segment that suffers the most will be the poor,” Agrawal said.

Several big reform efforts are required from the government if the economy has to get back to GDP growth levels of 7 per cent, he said.

On broking, AMC business

Asked about his broking business, Agrawal said that the broking industry in India will go through consolidation and that MOFSL was ready to look at ‘inorganic route’ of right small-sized broking houses. “My target for inorganic will depend on our clients. We will also do organic as there is enough growth for us. In the next one year, we will grow to 3,000 touch points from 2,000 now,” he said. “I feel that both models — one along with advisory service, and the other — only discount broking, will co-exist in the coming years in India. But technology will definitely be prominent in the days to come. I will exploit technology and also cater to clients who need advise and charge for my expertise,” he said.

On asset management business, Agrawal said the current AUM was at ₹40,000 crore. “We are not looking to list the AMC business in the short term. It’s not on the drawing board for the next 12 months,” he added.

Published on January 09, 2020
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