Budget 2024: Hiked Tax A Huge Drag For India, Says Julius Baer's Mark Matthews

The hike in capital gains tax by Finance Minister Nirmala Sitharaman in Budget 2024 is a huge drag for India as most emerging markets do not tax capital gains for non-residents, according to Mark Matthews, managing director of Julius Baer.

However, when compared to developed markets, the rise in the long-term capital gains tax, currently at 12%, is acceptable, according to Matthews, since it is much lower. He compared the hiked tax with that of Canada, which has gone up to 67%.

The capex story from the February interim budget has remained unchanged in India. The government is maintaining its stance to develop the infrastructure, he said, adding that consumer staples remain expensive. “The importance of the budget for the economy and the markets has been declining over the years. Many decisions are being made outside the budget.”

Matthews highlighted that since the presence of artificial intelligence is increasing gradually, US is the biggest market for it. This makes US markets a preferred place to invest, he said. A 10% correction would make him reinvest in the Indian markets.

In Asia, Matthews is overweight on India and considers it as his favorite emerging market. “It can outperform its peers and US in the coming years.” India presents itself as a growth market, he said emphasising the importance of equity investments for enhancing growth.

Narrowing the fiscal deficit could potentially result in an upgraded credit rating for the country's bonds, but the attractive yield opportunities worldwide, particularly in developed markets, suggests that there is currently no need to specifically invest in Indian bonds, he said.