Budget 2015: There is more than one reason for FIIs to cheer, says Samir Arora

The finance minister has presented a Budget with a long-term vision, which I would rate very high. But in the short run, India’s stock markets could continue to trade in a narrow range, as the Budget has not changed the immediate prospects of besieged sectors like infrastructure, capital goods, real estate and state-owned banks.

One can expect a return of around 15% from stock markets this year, as we will have to wait for specifics in terms of the implementation strategies on various Budget announcements. Reactions from corporate houses, too, need to be watched on various changes introduced in the Budget.

So far, we have stayed away from sectors like real estate, telecom and state-owned banks and we will continue to do so. There is nothing in the Budget that will force us to change our sector preference for investment. We like secular growth stories, and hence, private sector bank, consumer, information technology, pharmaceutical and non-banking financial company stocks. For foreign institutional investors (FIIs), the Budget surely has some good news.

Postponing General Anti-Avoidance Rules (GAAR), a draconian tax law for FIIs, was absolutely essential. One suggestion, which most of those who understand markets and tax laws would give, is that GAAR should be scraped. Another key announcement was a proposal on permanent establishment of offshore fund managers.

Mr Jaitely has said managers of offshore funds who have a physical presence in India will not be considered under the definition of permanent establishment. Such an announcement will encourage many fund managers to relocate to India and legitimise the presence of several others based in the country. This is an example of the government trying to build the ‘ease of doing business’ environment.