look news india
Mumbai: Mid-caps and small-caps are still rallying post the Budget despite concerns over hike in long-term and short-term capital gains tax, high valuations and rising retail participation in stock markets, especially F&O.
After the presentation of the budget on July 23, the BSE Midcap index has seen a rise of 6 percent and the Smallcap index has seen a rise of 7 percent. In comparison, the BSE Sensex has risen by about 2.50 percent.
Although tax on LTCG has been increased from 10 per cent to 12.50 per cent and STCG tax has been increased from 15 per cent to 20 per cent, tax on the stock market, especially retail and domestic funds, continues to be taxed.
Concerns expressed about high valuations of small-caps and mid-caps are not being taken seriously, said an analyst.
Small-cap and mid-cap stocks are also enjoying high valuations due to heavy investments in equity schemes of fund houses and enthusiasm in the stock market by retail investors.
Overconfidence in the stock market is fuelling speculative activity to make huge profits, a matter of concern. The Centre's Economic Survey 2024 says that though the outlook for India's financial sector is bright, several areas require special attention.
Another analyst said that the growth in market cap, high valuations in many small-cap stocks and lack of liquidity in the secondary market could be risk factors for the market. There have been instances of a big rally in small-midcaps once every three or four years.
Meanwhile, in the financial year 2022-23, the government got Rs 98,681 crore through LTCG, which is expected to increase significantly in the current financial year. When LTCG was re-implemented in 2018, the government got Rs 29,220 crore from LTCG in the financial year 2018-19.
