Stock Mkts Bloom As T- tax Gloom Clears

Mumbai, July 21 | Updated: Jul 23 2004, 04:13am hrs
The benchmark indices rallied towards the fag end to settle at its two-month high after the finance minister revised the transaction tax (T-tax) on securities. Trading was flat till the last 10 minutes of closing, however, the proposal on transaction tax lifted the 30-share BSE Sensex to a high of 83 points, before closing the day at 4,993.76, up 35.88 points from Tuesdays close. The Sensex came-off its intra-day high as trades got averaged post closing coupled with selling at higher levels. The BSE Sensex touched an intra-day high of 5,041.19 and an intra-day low of 4,951.55.

The boarder 50-share S&P CNX Nifty index gained 15.30 points to end at 1,581.40. Dealers said, short covering from traders and jobbers in cash as well as derivative segment, was the prime reason for lifting the market towards the closing stages, as the revised proposal on transaction tax was favourable for them. Stocks like Reliance Industries and State Bank of India wintessed major short-covering, dealers said.

For most part of the day, markets were trading in a narrow range, with turnover recorded on the BSE till 15:00 IST was around Rs 1,133 crore. However, in the last half-an-hour, following positive proposal on transaction tax on securities, the turnover rose on the BSE by Rs 355 crore to Rs 1,488 crore. Finally on the BSE, the turnover recorded was marginally lower than Tuesday at Rs 1,494.37 crore (Rs 1,569.55 crore) on the traded volumes of 12.79 crore shares (13.29 crore shares). On the NSE, the turnover recorded was Rs 3,624.13 crore (Rs 3,949.66 crore) on the traded volumes of 27.78 crore shares (31.56 crore shares).

The Nifty July futures witnessed a drop in discount of 4.75 points to the Nifty spot on Wednesday as compared to 14.45 points on Tuesday. The Nifty July futures ended at 1,594. Meanwhile, the FIIs continued to remain buyers and bought equity to an extent of Rs 61.10 crore on Tuesday as compared to Mondays Rs 99.60 crore.

The Union finance minister said that the tax, which the Budget proposed on purchases of exchange-traded securities, will only be applied to delivery of securities and that it will be shared between the buyer and the seller. While, the proposed 0.15 per cent transaction tax on securities purchases and sales will apply only to the delivery-based trades, transaction tax has been proposed to cut to 0.015 per cent on non-delivery-based transactions in the cash segment, and 0.01 per cent on the trades in the derivative segment. The bond market will be fully exempted from the proposed tax.

Vibhav Kapoor, Group Investment Strategist, IL&FS, said: The proposal are encouraging and have fully addressed the problem of transaction tax. However, the market is not expected to see any major run away as monsoon is a big concern. Moreover, international crude oil price rise hovering around $40-41 per barrel is also looming over the market.

Nanadan Chakravarty, head of research, Enam Securities, said: Transaction tax was not a worry as it was more or less discounted, however, going forward, the major concern is the monsoon.

On Wednesday, the prime minsiter in his statement to the Parliament said: The country is likley to witness 10 per cent shortfall in monsoon this year. This in turn is likely to pave the way for lower rural spending, thereby, hitting corporate performance of almost the entire old economy companies, whose 60-65 per cent revenues comes from the rural segment. Despite concerns over monsoon, the market was completely focused on the issue of transaction tax.

Following the favourable change in transaction tax, most of the indices on the BSE ended in a positive territory. Advances outperformed the declines. Of the total 1,933 shares traded on the BSE, 1,064 shares ended in a positive territory, while 788 shares ended in the red. 81 shares remained unchanged.