The market capitalisation of BSE companies hit an all-time high on Thursday, a day after markets cheered Union government’s Budget proposals including its decision to exempt category 1 and 2 foreign portfolio investors (FPIs) from indirect transfer provisions, reports Sundar Sethuraman in Mumbai.
The market capitalisation of BSE hit Rs 114.96 lakh crore; earlier it had hit an all-time high on October 24, 2016, when the market capitalisation reached Rs 114.46 lakh crore.
The government’s move to reassure investors comes a month after tax department issued a clarification on the scope of indirect transfer provisions. These clarifications could have affected FPIs and put them under greater scrutiny from the income tax department. The circular led to many FPIs making representations to the finance ministry asking them to reconsider the circular.
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Market participants were also enthused with the government’s decision not to tinker with the rules related to securities transaction tax and long-term capital gains. Such a move was widely expected after Prime Minister Narendra Modi’s comments in December hinting at increasing taxes on capital markets.
“Those who profit from financial markets must make a fair contribution to nation-building through taxes. For various reasons, the contribution of tax from those who make money on the markets has been low,” Modi had said while speaking at a function organised by the Securities and Exchange Board of India.
Further, the government’s decision not to increase the fiscal deficit target beyond 3.2 % of GDP also enthused markets. Mark participants were concerned that the government may resort to populist measures to counter the impact of demonetisation.
Market participants said the rally in mid- and small-cap stocks and the surge in the primary market also contributed to the swelling of total market capitalisation of the BSE-listed companies. After outperforming the broader market index for the last three years, the mid-cap index has risen by 9.6% in calendar year 2017 so far against the Sensex’s gain of 6.1%.
Sundar Sethuraman