Corporate Tax cut: Nifty, Sensex soars today

Today Nifty and Sensex opened higher with the expectation of positive GST meeting outcome. But the morning press conference of the Finance minister ahead of GST meeting surprised the street and soars NIfty and Sensex the biggest gain of all time. In the end, the Nifty gained 569.40 points and closed at 11,274.20 and Sensex gained 1921.15 points and closed at 38014.62. 

Sensex and Nifty after Finance minister press conference

Both Sensex and Nifty gained 5.32% higher today. Bank Nifty share price also rallied sharply today, gained 2223.85 points and closed at 28981.50. Bank nifty gained 8.31% and has given a movement of 2691.40 points during the day today.

The key takeaways of Finance ministers Nirmala Sitharaman Press conference

The government has proposed to reduce the corporate tax rate for domestic companies and new domestic manufacturing companies. The ordinance in this regard has been passed.

If the domestic company doesn’t seek any incentive or exemption then the tax rate is 22%. 

The effective Tax rate inclusive of all surcharges and cess for such domestic companies will be 25.17%.

Such companies are not required to pay Minimum Alternative Tax (MAT)

The corporate tax rate has been brought down to 15% from 25% for new manufacturing companies. Effective tax shall be 17.01 including cess and surcharge. 

It is for those companies that will start production before 2023 and incorporated after 1st October 2019.

In order to stabilize fund flow in the capital market, the enhanced surcharge which was introduced in 2019 budget shall not apply on capital gains arising on sale on equities in the hand of individual, HUFs and AOP.

The tax on buyback shall be removed for listed companies that have already made public announcement of buyback before July 5th 2019.

CSR-2% fund can be spent on incubators funded by center or state government or any agency or PSU or central/state govt as well as public-funded universities like IITs.

The total revenue foregone for corporate tax and other measures are Rs1.45 lakh crores per year.

Today’s announcement is one of the biggest events in the stock market history. The equity market cheers and welcome the biggest announcement of the corporate tax cut. Now Indian corporate tax has become very attractive in Assia which is even at par with China. This will attract more foreign investment in the near term.  

Sensex and Nifty Today

The announcement has soars Nifty, Sensex and Bank Nifty today and managed to turn the negative sentiment in the market into a big positive. The measures that the government has taken today will give a big boost in the corporate world. It will not only enhance liquidy in the hands of corporate but will also create jobs, investment, and development in the industrial sectors.

Today except IT and power all sectors closed in green. The  Auto, Banks, Infra, Realty sector gained more than 7% today. The top five Nifty50 gainers of the day are Eicher Motor, Hero Motorcorp, IndusInd Bank, Ultratech Cement and Maruti Suzuki. All top gainers closed at more than 10% higher today. On the losing side, the top losers in the Nifty50 stocks are Power Grid, Zee Ent, Infosys, TCS, and NTPC.

Nifty midcap and smallcap 100 indexes also spike sharply today. The Nifty midcap gained 904.25 points around 6% up and Nifty smallcap gained 212.95 almost 4% up from the last day’s close. Edelweiss and Page Industries are the top gainer in midcap and Dewan housing and Vakrangee are top losers of the day. In the Nifty smallcap index NCC and Bombay Burmah are the gainer and Jaiprakash associate and RCom are the loser.

The Brent crude oil future is 0.53% up today currently trading at $64.75 per barrel. Indian rupee has appreciated today is currently trading at Rs 71.03 down 0.46% against the US dollar. 

Conclusion

The corporate tax cut will be the game-changer for the market. The Nifty and Sensex today gained the biggest single-session gain. The investors are waiting for another press conference in the evening for GST cut. The continues efforts and measures taken by the Indian government to revive the Indian economic growth is really appreciable. Traders need to be cautious before taking any position next week. All traders should trade with strict stop loss only.

You can also read our Monday’s technical views of Nifty and Bank Nifty

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Indian Stock Market Outlook for September Series

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