The headline indices Sensex and Nifty registered their biggest one-day gain in over a decade after FM Nirmala Sitharaman announced a slew of big-bang reforms to revive the ailing economy. The Sensex saw its highest ever intra-day jump of 2,285 points to hit the day’s high at 38,378, but later ended the session at 38,014. Similarly, the broader Nifty zoomed 569.40 points or 5.32 per cent to close at 11,274.20. Hero MotoCorp, Maruti Suzuki, IndusInd Bank, Bajaj Finance, SBI, M&M, HDFC Bank, HUL and L&T were the biggest gainers in the index, closing up to 12.52% higher. PowerGrid, Infosys, TCS, NTPC and Tech Mahindra were the only losers, closing up to 2.39% down.
Taking stock of the development, Ajit Mishra Vice President, Research, Religare Broking said that the announcements came just in time as markets were reeling under tremendous pressure, citing weak domestic sentiments and not so encouraging global markets. “On the benchmark front, Nifty should hold above 11,250 to carry this momentum else profit-taking may resume. We suggest being selective at current levels as participation would restrict largely to the quality names,” he added.
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According to Ajay Bodke of Prabhudas Lilladher, equity markets would rejoice as the multi-year cycle of earnings downgrade will finally come to an end. “A significant valuation re-rating will follow as the market would start building in a virtuous cycle of upgrade in earnings trajectory over the medium-term due to both tax savings & boost in revenues due to perk-up in aggregate demand. The engine of domestic consumption will fire first followed by the investment engine on the back of corporates regaining their mojo,” Ajay Bodke, CEO PMS Prabhudas Lilladher said.
FM Nirmala Sitharaman has announced four key measures including cutting corporate tax rate, withdrawing tax on share buyback, reducing the minimum alternate tax and providing tax relief to FPIs on capital gains. FM slashed effective corporate tax to 25.17% inclusive of all cess and surcharges for domestic companies, subject to condition that such companies will not avail any exemption/incentive. Further, the firms opting for 22% income tax slab would not have to pay a minimum alternative tax (MAT). The domestic manufacturing companies incorporated after October 1, can now pay MAT at a rate of 15% without any incentives. With this, the effective tax rate for new manufacturing companies will be 17.01 per cent inclusive of surcharge and cess.