FM Booster 4.0: Experts cheer tax cuts, say move to arrest slowdown
Following the announcement, Sensex and Nifty logged their biggest single-day gains in a decade.
Sitharaman said the revenue foregone on reduction in corporate tax and other relief measures will be Rs 1.45 lakh crore annually.Sitharaman said the revenue foregone on reduction in corporate tax and other relief measures will be Rs 1.45 lakh crore annually. Following the announcement, Sensex and Nifty logged their biggest single-day gains in a decade.
Here's how experts on Dalal Street reacted to FM's tax bonanza:
AK Prabhakar, Head of Research, IDBI Capital Market
The announcement is very positive big boost for corporate India. Larsen & Toubro, Maruti Suzuki, Mahindra & Mahindra, Kotak Mahindra Bank, ICICI Bank, HDFC Bank, HUL, Dabur, HDFC, Baja Auto, Hero MotoCorp, Colgate Palmolive, UltraTech and BEL are few high tax paying companies which can see huge short covering.
Sanjeev Hota, Head of Research, Sharekhan
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. 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.
Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote
This is yet another surgical strike on bears and negative sentiments in the economy which will create an environment of surplus in the hands of corporates for making further investments and ease their liquidity concerns. The reduction to 22% in corporate taxes will result in massive release of Rs 1,45,000 crore immediately in the economy which will boost sentiments and bring in real surplus to the corporates. Companies in consumer finance, banks both private and public sector, hotels all pay upwards of 32% tax will have maximum benefits, however rest of the sectors will have nominal positive impact. This is a path breaking move delivered by Modi 2.0 government in the interest of economy at the cost government exchequer in times of crises which will go down well in the history.
Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities
The Government’s announcements today is definitely a positive move. It is also a prudent move to reduce the corporate tax rates because (1) it increases the retained earnings of the companies and forms the investible surplus for future, (2) moves India to parity with its regional peers thereby removing one of the issues related to manufacturing and exports, (3) maintains macro prudence by continuing to favour investment cycle rather than consumption cycle. On the flip side it will negatively impact the bond market as the revenue forgone due to the tax rate reduction will make it difficult to stick to the GDP budgeted target.
Anil Agarwal, Chairman, Vedanta
There cannot be better day for India than what has happened today. It is an amazingly bold move by Nirmala Sitharaman and the Modi government. The tax level has been brought to global level and on the top of it, incentives have been given for the new industry. This will give I think boost to the sentiment.
Nirmal Jain, Chairman, IIFL Group
Finance Minister Nirmala Sitharaman's Rs 1.45 lakh crore stimulus to reboot India is a bold move to unleash the animal spirit! This can certainly turn the tide for the economy & markets! Also it’s a move towards simpler low tax regime with no or minimal incentives exemptions (which are misused more than used).
Ajay Piramal, Chairman, Piramal Group
The announcement made by the Finance Minister today is commendable. With this the Government has signalled that it is listening to the Industry and is willing to embrace it as a partner for progress of the Country. We are certain that this Big Bang reform will kickstart the economy. Surplus funds available to companies will be invested in capex and talent. The NBFC sector will save between Rs 250 - 300 crore that can potentially be redeployed as loans. In a climate of global slowdown, this reform will make India an attractive destination for FIIs and long term investors. The announcement has brought parity to India’s corporate tax rate compared to that of advanced markets thus making it very competitive.
VK Vijayakumar Chief Investment Strategist, Geojit Financial Services
The measures announced by the FM this morning can be described as a 'New Deal' for the Indian economy. Reduction in corporate tax rate to 22 percent (25.17 % effective rate) and for new manufacturing companies to 15 percent and reduction on MAT are big boost to investment. The psychological stimulus from this 'New Deal' will be higher than the fiscal stimulus. Animal spirits will respond positively. The message from Dalal street is a clear signal. Bold move indeed!
VK Sharma, Head - PCG & Capital Market Strategy HDFC securities
The FM has done what it takes to trigger animal spirits in the industry. The unprecedented 4.5 per cent rise that the markets have seen intraday today is the highest in 5 years. This is a result of a massive short covering and augurs well.
Naveen Kulkarni, Head of Research, Reliance Securities
This is a major long term structural positive for the market as not just corporate profitability will improve but investments will also rise. Indian market will re-rate with this announcement. Foreign investments are likely to see a pick up both in FDI and FII formats.
Ajit Mishra, Vice President Research, Religare Broking
The finance minister has finally taken strong measures to kick start the economy. The corporate earnings had worsened in the last few quarters mainly due to the ongoing slowdown. The cut in corporate tax rate would mean more income for corporates. This would have a direct positive impact on the EPS on all domestic companies. Further, this move along with the easing of enhanced surcharge has the potential to revive FII sentiments as well, as the corporate tax rate makes Indian companies more competitive in the global markets.
Kumarmanglam Vijay, Partner, J Sagar Associates
The government move to announce sweeping tax changes is unprecedented and the fact that these are being implemented through an ordinance in middle of the year gives confidence that it is willing to do all it can to spur the economic activity.