To ignore the Budget, or not to? Why D-Street jitters mean nothing

Since I started advisory services, I keep receiving interesting questions from members. Though replete with sampling bias, they gave me glimpses into what investors think. For something now, everyone has been now focused on the Budget and its implications.

My take on events (or non-events, as they turn out to be more often than not) like these – Budgets, elections etc. – is that we get carried away by recency and vividness biases. Just because these events are happening now and everyone –media, friends or family – is speaking about them, it is vivid and entraps us in the narrative.

When we think of Budgets, how many of them do you remember after a few years? How many ground-breaking Budget ideas do you remember? Even for policies that created huge interest at the time – introduction of STT, DDT, removal of LTCG, removal of wealth tax – how many really impacted you or your investment and to what extent?

This year’s Budget has a couple of points, which interested me. One of them is the idea of government borrowing in foreign currency. This will probably help the private sector, as the government’s domestic borrowing usually dominates the market. If it drops, then the private sector may be able to raise capital at more competitive rates. However, I am not sure how the currency risk is going to be mitigated in foreign currency bonds.

The other idea that I found interesting is the nudge to Sebi to reduce maximum promoter holding in listed companies from 75 per cent currently to 65 per cent. This could have both positive and negative repercussions. MNCs and promoter-held companies with 75 per cent holding may not be happy to dilute stake and may decide to delist. On the other hand, others may be okay to reduce their holdings to 65 per cent or below.

We need to wait and see if and how Sebi wants to implement this proposal and what are the timelines set for compliance of the same. I remember the furore created when the maximum promoter holding was reduced to 75 per cent. But as I said earlier, nothing catastrophic happened.

Now that the two major events are out of the way, media pundits will start looking for, and find, the next breaking news to draw the eyeballs. Their business is in emphasizing on the recency and vividness of events so that people are glued to them. And India Inc will keep doing what it does best despite all this.

(The author is the chief equity advisor at www.intelsense.in. Views are his own. Nothing in this article should be construed as financial advice.)