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14 Jul 2019

STOCK MARKET-- Why did the stock market not like the budget?

1.       The Promoters can keep maximum of 65% shares with them, rest 35% should be with public. Previously it was 75% and 25%. Most of the good Companies have Promoter holding more than 65% so lots of shares will be ready for sell. Since last one year Kotak Mahindra Bank got frustrated by selling huge numbers of shares by Promoters in open market.
2.      20% Tax imposed on Buyback offers. Generally to avoid Dividend Distribution Tax of @15% Companies were using the cash for Buyback. Now Tax on Buyback as well as maximum cap on Promoter holding will force Promoters to seek alternative routes to use surplus cash
3.      Government requested PSUs to purchase the Assets of NBFCs. At present NBFCs are trying their best to bring foreign investors to sell their Assets though with big discounts still the NBFCs are exploring the market. Now they will be relaxed.
4.      Government is infusing funds to PSUs but for Private Banks there is nothing to revive. Apart from that HFCs will be regulated by RBI instead of NHB.
5.      Surcharge in 2 individual income tax category ie 2 to 5cr @3% and 5cr and above @7%--Highest tax rate in India is 42%
6.      Cess of Rs 1 has been increased in Petrol and Diesel.
7.      All the above are directly related to stock market which will negatively impact the market. To woo the stock market there must be something which will increase the purchasing power of the common man, which will indirectly increase the consumption, will generate employment. But the budget seems to be prepared to empty the pockets of common people to fill the treasury of the Government. With empty pockets who has the luxury to buy electronic products name shares where there is no earnings visibility. These are the reasons stock market didn't like the budget

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