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Diwali comes early! D-Street spins Rs 7 lakh cr wealth in a day

Analysts said that the move should aid Nifty earnings per share (EPS).

ETMarkets.com|
Updated: Sep 20, 2019, 04.02 PM IST
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The measures will help revive flagging animal spirits, said analysts.
NEW DELHI: The tax bonanza by the FM Nirmala Sitharaman to FPIs and corporate sector gave Dalal Street investors Rs 7 lakh crore lift on Friday.

Data showed BSE market capitalisation surged to 145.36 lakh crore following the announcements compared with Rs 138.54 lakh crore on Thursday, as the BSE Sensex soared nearly 2,000 points, and the NSE barometer Nifty50 jumped 569 points, their highest intraday gains in a decade.

Analysts said that the measures should aid Nifty earnings per share (EPS).

"Banking, FMCG, consumer durables and auto companies will be major beneficiaries. The manufacturing sector will become attractive with a 15 per cent Corporate Tax rate for new manufacturing companies in India especially in the times when the world is in the phase of trade wars," said Rajiv Singh, CEO, Karvy Stock Broking

In order to stablise the flow of funds into the capital market, the FM said that enhanced surcharge introduced in the Budget will not be applied on capital gains arising on sale of equity share, if securities transaction tax is paid.



The enhanced surcharge will not be applied to capital gains arising on sale of any security, including derivatives in the hands of foreign portfolio investors, the FM said.

Sitharaman said that the effective corporate tax rate will be lowered to 25.75 per cent from 30 per cent, which she said would be at par with Asian peers. The government also scrapped the minimum alternative tax for domestic companies. The revenue foregone on reduction in corporate tax and other relief measures will be Rs 1.45 lakh crore annually.

In order to provide relief for listed companies, any company which has already made a public announcement of buyback before July 2019, will not be charged tax.

Ajay Bodke, CEO for PMS at Prabhudas Lilladher said that it is a boost to revive flagging animal spirits and position India as one of the most attractive business destinations.

"The measures should act as a force multiplier for the flagging economic engine. By slashing corporate tax rate for existing domestic companies and an extremely attractive rate of 15 per cent for new companies setting up manufacturing operations, the government has rolled out a red carpet that would ensure hundreds of billions of dollars of FDI & FII flows over the medium term. It is in a true sense an early arrival of festival of lights (Diwali) and banishment of long period of darkness & gloom bothering the Indian economy," he said.

The government has taken a bold and proactive step to bring much needed tax reforms , which will boost investment and also aid to private cycle capex, said said Sanjeev Hota, Head of Research at Sharekhan.

"The lowering of corporate tax rate will also widen the tax net and will gradually bring more revenues to government. Overall, the move will make Indian companies globally competitive, a welcome step to arrest slowdown and lift up the market sentiments,” the expert said.
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