The headline indices Sensex and Nifty posted their biggest single day gain since the exit poll results announced in May, after reports that the government is likely to withdraw higher surcharge on foreign portfolio investors.
The headline indices Sensex and Nifty posted their biggest single day gain since the exit poll results announced in May, after reports that the government is likely to withdraw higher surcharge on foreign portfolio investors. The Sensex ended 637 points higher at 37,327, while the Nifty reclaimed the crucial 11,000-mark. While the Sensex had remained subdued during the day, the rally in the fag end of the session was led by energy, oil and gas, auto and IT stocks. After gyrating 750 points during the day, the Sensex settled 636.86 points or 1.74% higher at 37,327.36. On exit poll day on May 20th, the Sensex had vaulted 1,422 points, its highest in over a decade to reclaim the crucial 39,000-mark.
According to experts, the government’s decision to roll back tax on FPI’s will be a welcome move, as it will boost confidence of FPI’s in the Indian market. “Refusal to roll back the FPI surcharge tax and absence of a fiscal stimulus to beleaguered sectors like autos & NBFCs are the principal reasons for the plunge in Indian equities. Any move to offer a generous relief on both these counts can lead to a massive short covering by speculators and an strong rally due to buying from FPIs and domestic Institutional investors,” Ajay Bodke, CEO PMS, Prabhudas Lilladher told Financial Express Online.
Technical analyst Milan Vaishnav noted that the oversold markets needed a trigger to rally, and the government saying that it will scrap the tax surcharge provided just that. “The markets, that were anyway oversold on the charts, got the required impetus and saw an extremely strong wave of short-covering. Additionally speaking, the news is also doing rounds that the Government is also considering doing away with Long Term Capital Gains Tax (LTCG) and this also aided the short-covering move,” Milan Viashnav, CMT, MSTA Consulting Technical Analyst, Gemstone Equity Research & Advisory Services told Financial Express Online. According to investment advisor Sandip Sabharwal, while FPI tax roll-back will be positive for the markets, for any upmove to sustain, the stock markets will need various measures to revive the economy.