Railway Budget, Economic Survey in focus ahead of Union Budget
Indian stocks may remain volatile next week as traders roll over positions in the futures & options (F&O) segment from the near month February 2016 series to March 2016 series. The February 2016 derivatives contracts are set to expire on Thursday, 25 February 2016. The two key events lined up during the week are Railway Budget for 2016-17 on Thursday, 25 February 2016, and Economic Survey for 2015-16 on Friday, 26 February 2016.
Stocks of companies from steel, cement, coal, iron ore and fertilizer sector will be in focus as Railway Minister Suresh Prabhu presents Railway Budget for 2016-17 in the Lok Sabha on 25 February 2016. Substantial movement for these commodities takes places through the Railways and it remains to be seen if the Rail Minister announces changes in freight rates in the Rail Budget. According to reports, the Railway Minister will unveil a plan in the Rail Budget to cut expenses of the Railways and at the same time increase non-tariff revenue substantially.
The Finance Ministry will present Economic Survey for 2015-16 in parliament on 26 February 2016. The annual document reviews the developments in the Indian economy over the previous 12 months, summarizes the performance on major development programmes, highlights the policy initiatives of the government and the prospects of the economy in the short to medium term.
The next major trigger for the stock market is Union Budget 2016-17, which will be unveiled in the Parliament by the finance minister Arun Jaitley on 29 February 2016. Investors want to see if the government is able to keep spending on areas such as building rural roads, houses and other infrastructure, without letting its fiscal deficit targets slip. In Union Budget 2015-16, Jaitley had stretched the fiscal deficit target to 3.9% of GDP for 2015-16 from the earlier 3.6% to address growth concerns. At that time, he had set fiscal deficit target at 3.5% of GDP for 2016-17.
According to news reports, the finance minister may bring in changes in the service tax regime and withdraw excise duty exemptions on some items in the Budget to set the stage for the rollout of the nationwide goods & services tax (GST). The list of exempted items under the GST will required to be pruned substantially so that it contains only essential items. This is key to keeping the GST rate low.
Meanwhile, the government may raise the rate of service tax to 16-17% to bridge the gap between the current service tax rate and proposed GST rates. Further, the Budget may rationalise exemptions available under service tax to align with the minimal proposed exemptions under GST, according to media reports.
Revenue Secretary Hasmukh Adhia indicated recently that the government would announce a final roadmap for rationalising corporate tax exemptions in the Union Budget 2016-17. Following Jaitley's proposal in the Union Budget 2015-16 to lower corporate tax rate to 25 per cent over the next four years, the Central Board of Direct Taxes (CBDT) on 20 November 2015 released a draft proposal suggesting that all profit-linked, investment-linked and area-based deductions for both corporate and non-corporate taxpayers would be phased out.
Meanwhile, recent reports have suggested that the government is mulling whether to raise the time frame of long-term capital gains tax on sale of shares to three years from current one year. Currently, investors don't have to pay any capital gains tax on shares sold on an exchange after one year of holding. Currently, short-term capital gains tax is 15% if shares are sold within a period of one year from the date of purchase. However, given the recent turmoil in global financial markets, the government may not make changes to the existing capital gains tax regime on sale of shares in the Union Budget 2016-17.
Among key global data, Eurozone Markit PMI Composite index for February 2016 is scheduled for release on Monday, 22 February 2016. US new home sales data for the January 2016 is due for release on Tuesday, 23 February 2016. US Q4 GDP data is due on Friday, 26 February 2016.
Stocks of companies from steel, cement, coal, iron ore and fertilizer sector will be in focus as Railway Minister Suresh Prabhu presents Railway Budget for 2016-17 in the Lok Sabha on 25 February 2016. Substantial movement for these commodities takes places through the Railways and it remains to be seen if the Rail Minister announces changes in freight rates in the Rail Budget. According to reports, the Railway Minister will unveil a plan in the Rail Budget to cut expenses of the Railways and at the same time increase non-tariff revenue substantially.
The Finance Ministry will present Economic Survey for 2015-16 in parliament on 26 February 2016. The annual document reviews the developments in the Indian economy over the previous 12 months, summarizes the performance on major development programmes, highlights the policy initiatives of the government and the prospects of the economy in the short to medium term.
The next major trigger for the stock market is Union Budget 2016-17, which will be unveiled in the Parliament by the finance minister Arun Jaitley on 29 February 2016. Investors want to see if the government is able to keep spending on areas such as building rural roads, houses and other infrastructure, without letting its fiscal deficit targets slip. In Union Budget 2015-16, Jaitley had stretched the fiscal deficit target to 3.9% of GDP for 2015-16 from the earlier 3.6% to address growth concerns. At that time, he had set fiscal deficit target at 3.5% of GDP for 2016-17.
According to news reports, the finance minister may bring in changes in the service tax regime and withdraw excise duty exemptions on some items in the Budget to set the stage for the rollout of the nationwide goods & services tax (GST). The list of exempted items under the GST will required to be pruned substantially so that it contains only essential items. This is key to keeping the GST rate low.
Meanwhile, the government may raise the rate of service tax to 16-17% to bridge the gap between the current service tax rate and proposed GST rates. Further, the Budget may rationalise exemptions available under service tax to align with the minimal proposed exemptions under GST, according to media reports.
Revenue Secretary Hasmukh Adhia indicated recently that the government would announce a final roadmap for rationalising corporate tax exemptions in the Union Budget 2016-17. Following Jaitley's proposal in the Union Budget 2015-16 to lower corporate tax rate to 25 per cent over the next four years, the Central Board of Direct Taxes (CBDT) on 20 November 2015 released a draft proposal suggesting that all profit-linked, investment-linked and area-based deductions for both corporate and non-corporate taxpayers would be phased out.
Meanwhile, recent reports have suggested that the government is mulling whether to raise the time frame of long-term capital gains tax on sale of shares to three years from current one year. Currently, investors don't have to pay any capital gains tax on shares sold on an exchange after one year of holding. Currently, short-term capital gains tax is 15% if shares are sold within a period of one year from the date of purchase. However, given the recent turmoil in global financial markets, the government may not make changes to the existing capital gains tax regime on sale of shares in the Union Budget 2016-17.
Among key global data, Eurozone Markit PMI Composite index for February 2016 is scheduled for release on Monday, 22 February 2016. US new home sales data for the January 2016 is due for release on Tuesday, 23 February 2016. US Q4 GDP data is due on Friday, 26 February 2016.
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