Budget looks to attract more investors to stock market
New Delhi: The government on Thursday unveiled a slew of measures to attract more investors to the stock market and making it easier for foreign entities to make investments.
Presenting the Union Budget 2013-14, Finance Minister P Chidambaram proposed to strengthen capital market regulator Sebi and cut the securities transaction tax, which will bring down overall costs for investors.
Wooing overseas investors, he said Sebi will simplify the procedures and prescribe uniform registration norms for foreign portfolio investors.
Along with converging different Know Your Customer (KYC) norms, a risk-based approach towards them would be adopted to make it easier for foreign entities such as sovereign wealth funds and pension funds to invest in the country, he said.
"FIIs will also be permitted to use their investments in corporate bonds and government securities as collateral to meet their margin requirements," the minister said.
Last year, Indian market was among the top performers in the world, mainly helped by FIIs who pumped in USD 31.01 billion.
The Budget has also proposed to classify more than 10 percent shareholding by an overseas entity in a company as Foreign Direct Investment, while those at par or below this level will be Foreign Institutional Investment (FII).
A panel would be set up to work out the details, the Minister said.
The government is also looking to amend the Sebi Act to make the regulator more strong.
The amendment could see major overhaul of the securities laws including greater authority to nail manipulators by way of powers to conduct 'search and seizure' operations and to demand information from any person in relation to its probes.
Meanwhile, providing relief for investors, the Securities Transaction Tax (STT) would be cut on different categories, including equity futures.
In the equity futures segment, STT would be brought down to 0.01 percent from 0.017 percent. For Mutual Fund/Exchange Traded Fund redemptions, the levy would be cut to 0.001 percent from 0.25 percent.
Further, in the case of MF/ETF purchase or sale on exchanges, the same would be reduced to 0.001 percent from 0.1 percent, only on the seller.
Going by estimates, the tax accounts for a substantial part of the overall transaction costs in the stock market.
Chidambaram said that Rajiv Gandhi Equity Savings Scheme would be liberalised. The limit for investors wanting to invest in RGESS has been raised to Rs 12 lakh from Rs 10 lakh earlier. The scheme seeks to provide tax benefits to first-time investors in stock markets.
The Budget has proposed to allow small and medium enterprises, including start ups, to get listed on SME exchange without making an initial public offer (IPO).
This would be in addition to the existing SME platform in which listing can be done through an IPO.
"The Budget is good for capital markets and investments," Chartered Accountant S Ravi said.
Ravi, who is also an independent director on various public companies, said the fiscal prudence demonstrated by the Finance Minister - with emphasis on controlling the fiscal deficit and providing the impetus to investments - will bring back the country to the strong growth path.
Meanwhile to further develop the debt market, the government has proposed to allow stock exchanges to introduce a dedicated debt segment on the exchange.