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In our pre-Budget note, we saw limited market impact of the Budget itself with economic reform.
The Budget has met our expectations in terms of a long-term agenda on the following counts: a) Fiscal consolidation is a key focus with the Finance Minister giving a target of a 3 per cent fiscal deficit by FY17; b) The Budget announced FDI in insurance (hike to 49 per cent) and defence; c) The Finance Minister has promised DTC, GST over the next year. Overall, we continue to remain bullish on the markets and maintain our index target of 27,000 by year-end though near-term we could see some consolidation due to the monsoons. We recommend buying at every dip.
According to Sandesh Kirkire, CEO at Kotak Mutual Fund, the increase in the 80C limit enhances tax incentive for potential retail investors to invest into equities mutual fund. The increase in the long-term capital gains tax (LTCG) rate to 20 from 10 per cent and the tenure to three years from one, (for the debt mutual funds) leads to the closure of tax arbitrage.
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