Repeat of 2004 shock defeat for NDA appears unlikely, says Jefferies' Chris Wood; cautions on capital gains tax changes

| TOI Business Desk | TIMESOFINDIA.COM | May 25, 2024, 09:42 IST

Chris Wood, a global equity strategist at Jefferies has cautioned... Read More

Chris Wood, a global equity strategist at Jefferies, believes that potential changes in the capital gains tax regime for stock market transactions pose a more significant risk to Indian markets than the outcome of the upcoming elections. In his weekly note, 'Greed & Fear,' Wood said that a repeat of the BJP-led NDA's shocking defeat in 2004 is highly unlikely this time around. He said it is "unlikely in the extreme” this time.

However, he cautioned that modifications to the capital gains taxation could be announced in the Union Budget in July, following the general elections. According to an ET report, Wood highlighted that domestic fund managers are currently discussing the possibility of increased capital gains tax rates or an extension of the period required to qualify for long-term gains, or a combination of both.

At present, investors must pay a 15% short-term capital gains tax if profits from stocks and equity-oriented mutual funds are realized within one year of holding. Long-term capital gains, which are profits booked after holding for more than a year, are taxed at 10%.

Another proposal under consideration is to increase capital gains tax for retail investors while exempting those investing in mutual funds, he said.

Also Read | 'On June 4, markets will...': PM Modi's big prediction for Sensex on Lok Sabha election results day

Wood expressed his preference for extending the minimum holding period for levying the capital gains tax rather than raising the rates. He attributed the motivation behind these proposals to the growing evidence of retail speculation, particularly in the options market, which is unlikely to be viewed favorably by Prime Minister Modi or the BJP.

"Greed & fear's probably correct assumption is that the Indian prime minister has a natural suspicion of those making money out of money, most particularly in a zero-sum game like options," said Wood.

He emphasized that since his days as the Chief Minister of Gujarat, where he served for nearly 13 years, Modi has consistently focused on the physical manifestations of growth, with a particular emphasis on infrastructure construction.

Top 10 Largest Economies In The World

Top 10 Largest Economies In The World: India is all set to become the world’s third largest economy in the coming few years. But what is India’s current ranking in the world’s top 10 economies by nominal GDP size? Where do America and China stand? Did you know that at the current level, the USA's GDP is 7 times that of India? As per the latest IMF data sourced from EY, we take a look the world’s top 10 economies and their projected GDP in the coming years: (AI image)

The United States of America or the USA leads the list of top 10 largest economies in terms of nominal GDP for the year 2023 as per IMF’s estimates. The GDP for 2023 stands at $27,357.825 billion and the expected GDP for 2024 is at $28,781.083 billion. The IMF outlook till 2029 predicts that America will continue to be the world’s largest economy, with an expected GDP of $34,950.012 billion. (AI image)

As of 2023, China’s GDP according to IMF estimates stands at $17,662.041 billion. In 2024, China’s GDP is expected to rise to $18,532.633 billion in 2024, moving to $24,842.337 billion in 2029. China is likely to maintain the tag of the world’s second largest economy. (AI image)

Germany stands at the third rank in the list of world’s largest economies with a GDP of $4,457.366 billion in 2023. In 2024, Germany’s GDP Is likely to be around $4,591.1 billion and in 2029 it will likely be near $5,358.074 billion. According to IMF estimates, Germany would lose the tag of the world’s third largest economy 2027 to India. (AI image)

Japan is the world’s fourth largest economy with a GDP of $4,212.944 billion in 2023. Japan’s nominal GDP has been declining for the last few years and by 2025 it is likely to lose the spot of the 4th largest economy to India. In 2029, Japan’s GDP is expected to be around $4,944.744 billion. (AI image)

India is the fifth largest economy in the world with a GDP of $3,572.078 billion in 2023 according to the latest IMF data. In 2024, India’s GDP is expected to be $3,937.011 billion and in 2025 it will likely become the fourth largest economy with a GDP of $4,339.83 billion. IMF estimates predict that in 2027, India will beat Germany to become the third largest world economy with a GDP of $5,287.04 billion. By 2029, India’s GDP is expected to be around $6,436.653 billion. (AI image)

The United Kingdom or UK, with a GDP of $3,344.744 billion in 2023, is the sixth largest economy in the world. In 2024, its GDP is expected to be near $3495.261 billion and by 2029 the nominal GDP would be around $4661.463 billion, according to IMF projections. (AI image)

France is the world’s seventh largest economy with a GDP of $3,031.778 billion in 2023. Its nominal GDP is expected to grow to $3,130.014 billion in 2024 and reach $3,645.286 billion by 2029, predicts the IMF. (AI image)

With a GDP of $2,255.503 billion, Italy is the 8th largest economy in the world as per IMF’s 2023 data. Italy’s economy is expected to reach a size of $2,328.028 billion in 2024 and $2,625.878 billion by 2029. According to IMF estimates, in 2024 Italy will slip a level in rankings to 9th spot with Brazil moving up. (AI image)

Brazil is currently the world’s ninth largest economy with a nominal GDP of $2,173.671 billion in 2023. In 2024, it is expected to become the 8th largest economy with a GDP of $2,331.391 billion, leaving behind Italy. By 2029, it will likely have a GDP of $3,058.227 billion. (AI image)

Ready to Master Stock Valuation? ET's Workshop is just around the corner!

The TOI Business Desk is a vigilant and dedicated team of journal... Read More