Budget 2023: Hope there isn’t any tinkering with capital gains tax, said Devarsh Vakil of HDFC Sec

The key expectation from Budget 2023 is to maintain the growth path while keeping fiscal deficit and inflation in check, said Devarsh Vakil, Deputy Head of Retail Research, HDFC Securities. In an interview with MintGenie, he said that he hopes there isn’t any tinkering with capital gains tax in any way. Defence, Railways, Capital Goods, BFSI, and rural-facing sectors are likely to be in focus in the upcoming budget while the Infrastructure space will see a push, he predicted. Edited excerpts:

What should retail investors expect from the upcoming budget?

The upcoming Union Budget (on Feb 01) will be the last full-year budget from the Modi government ahead of the Lok Sabha elections due in early 2024. The key expectation from Finance Minister Nirmala Sitharaman is to maintain the growth path while keeping fiscal deficit and inflation in check.

Do you see the government tinkering with capital gains tax in any way?

We hope that there isn’t any tinkering with capital gains tax in any way. Though current and past central governments have progressively increased taxes on capital markets.

What new announcement do you expect from this budget?

The one-off support from the Covid period is ending and would ‘partially’ be compensated with higher allocation on food subsidies, employment guarantees and rural infrastructure.

Remove double tax on buyback through the open market.

Widen the tax net without increasing compliance requirements.

Which sectors will be in focus in the budget? Will auto, banks see a push?

Defence, Railways, Capital Goods, BFSI, and rural-facing sectors could be in focus. Infrastructure will see a push.

With the CPI under the RBI bracket now, do you see interest rates peaking in 2023?

Longer-term interest rates may stay elevated for some more time till global interest rates peak and pressure on INR reduce.

What are some headwinds that India has to battle in the first half of 2023?

The first half of the year (CY 2023) will see volatility due to multiple factors including moves by the central banks in the fight against inflation, concerns around recession and news flow around geopolitics and the fight against Covid. We may see stability in the stock markets and rupee in the second half of the year.

Amid global macro uncertainty and the ongoing rate hike cycle, do you advise investors to rebalance their portfolios? What should they add/reduce?

Stick to your asset allocation and systematic investment plans.

What retail investor trends should one watch out for in 2023?

Finalization of savings is a longer-term trend and it is likely to accentuate in 2023.