Stock market traders have taken to the streets to protest against the Unoin Budget proposal to impose a transaction tax of 0.15 per cent. |
The tax, as it finally stands after clarifications from the finance minister, will be imposed on all buy transactions done through any recognised stock exchange. |
The worst-hit if this is implemented will be the day traders, who, of course, work on wafer-thin margins. But how thin is wafer thin? 0.8 per cent, or 80 paise on a Rs 100 share. That happens to be the margin at which there is a break-even between the current tax regime and the proposed one. |
If traders make higher profits, that is higher than 0.8 per cent of the transaction value, the net gain is much higher under the proposed tax rates. |
Of course, for traders who evade tax on the capital gains they make, the new regime will result in lower profit. Also, capital losses will be higher to the extent of the 0.15 per cent transaction tax. |
But if one were to put it in numbers, what the protest really means is this: on an aggregate basis, day traders earn a return of less than 0.8 per cent on the transactions they make, or they don't pay taxes. |
FDI in insurance positive for holding firms |
With FDI limit in insurance sector going up from 26 per cent to 49 per cent, shareholders of several companies that have invested in insurance can take heart. |
Among the listed players which have a stake in life insurance ventures are ICICI Bank, Indian Rayon, HDFC, Allianz Bajaj, Max New York, State Bank of India, Kotak Mahindra and ING Vysya Bank. |
Probably only in the case of SBI is the investment not likely to make a significant contribution to the profits for a long , long time. ING Vysya has a 20 per cent stake in its venture and will now become probably more committed to banassurance. |
Prudential ICICI topped the league tables with a market share of 30 per cent , with Birla Sunlife second with 21 per cent. With Pru ICICI being valued by analysts at around Rs 44.7bn, the insurance business adds around Rs 58 per share to the value of ICICI Bank. Birla Sunlife was next on the charts followed by Tata AIG. |
The key difference between the top-rung players and the others like Allianz and HDFC appears to have been the lack of ULIPs(unit-linked policies) or in some cases the delay in launching ULIPs. |
This is an industry hugely dependent on capital to grow its business and thus for those players who were constrained by the Indian partner's inability to pump in capital, this is a chance to increase commitment. |
The point is that with more money being pumped into these insurance companies, they can increase their business more rapidly, leading to gains not only for themselves but also their holding companies. |
Interim budget, second edition |
Once the detailed figures are analysed, it's clear that Chidambaram's talk of higher spending and his concern for agriculture is a lot of hot air. |
What's the difference between the UPA's first budget and the interim budget presented by the NDA? Not much""- it's a mere 4.5 per cent larger, the fiscal deficit is the same at 4.4 per cent of GDP, and the revenue deficit is lower at 2.5 per cent of GDP compared to the vote-on-account's 2.9 per cent. |
The food subsidy is lower by Rs 2000 crore. Agriculture gets an amount marginally lower than in the interim budget, and the outlay on rural development is 30 per cent lower than in the revised estimates, despite all the talk. |
In spite of its much-vaunted concern for the states, the UPA government's budget envisages a net resource transfer of Rs 1,44,116 crore to states and union territories, compared to Rs 1,47,811 crore budgeted by the NDA government's vote-on-account. The rise in central plan outlay is just 4.6 per cent or Rs 7,292 crore. |
The budgeted figure for disinvestnment is only Rs 4,000 crore, compared to the interim budget's Rs 16,000 crore. Corporation tax receipts are up 11.2 per cent, and income tax receipts 10 per cent. |
How this will happen when rates haven't been raised is a mystery, unless the turnover tax has been included in IT or corporate tax. Service taxes have been projected to yield just Rs 14,150 crore against Rs 13,500 crore in the interim budget""- hardly any reason for hype. |
Revenue from excise is up 1.9 per cent, and from customs 2.4 per cent compared to the interim budget figures. |
Among non-tax revenues, dividends and profits have been revised upwards by Rs 3,500 crore. That's a signal for higher dividends from PSUs""in fact, dividends from non-bank PSUs is up 37 per cent. |
With contributions from Mobis Philipose and Shobhana Subramanian |