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Mid Session
Home >> Markets >> Equity >> News >> Mid Session Detailed News
Shares northbound; Nifty breaks above 11,200 mark
(12:30, 20 Sep 2019)

The market forged ahead in early afternoon trade after FM slashed effective corporate tax to 25.17% inclusive of all cess and surcharges for domestic companies. The Nifty broke the crucial 11,200 level.

At 12:30 IST, the barometer index, the S&P BSE Sensex, surged 1,746.15 points or 4.84% at 37,839.62. The Nifty 50 index spurted 508.90 points or 4.75% at 11,213.70.

Buying was wide spread. The S&P BSE Mid-Cap index was up 4.94%. The S&P BSE Small-Cap index was up 3.07%.

The market breadth favoured the bulls. On the BSE, 1709 shares rose and 537 shares fell. A total of 95 shares were unchanged. On the Nifty 50 index, 47 shares rose and 3 shares declined.

In a press conference held in Goa today, the Finance Minister Nirmala Sitharaman announced a slew of measures in order to reduce the prevailing taxation rates in the country.

The FM announced slashing of corporate tax rate for domestic companies and new domestic manufacturing companies. The FM added that the ordinance for cutting tax rate has been passed.

The FM said that the new corporate tax rate will be 22% without exemptions. The effective corporate tax rate after surcharge will stand at 25.17%.

To further attract investment in manufacturing, local companies incorporated after October 2019 will pay tax at 15%, the FM added.

The government has also decided to not levy enhanced surcharge introduced in Budget on capital gain arising from sale of equity shares in a company liable for securities transaction tax (STT). To stabilise flow of funds into the capital market, enhanced surcharge under Finance (No.2) Act, 2019 will not apply on capital gains arising on sale of equity share in a company or a unit of an equity oriented fund or a unit of a business trust liable for STT.

Higher surcharge will also not apply on capital gains on sale of security including derivatives held by foreign portfolio investors (FPIs).

Listed companies that have announced buyback before 5 July 2019, tax on buyback of shares will not be charged.

Total revenue foregone for the reduction of taxes and other reliefs is estimated to be at Rs 1.45 lakh crore per year.

The government has decided to expand the scope of spending 2% profits on corporate social responsibility (CSR) to allow spending on incubators or research grants to institutes engaged in promoting science research.

FM also announced that effective tax for new companies shall be 17.01%, including cess and surcharge. Companies enjoying tax holidays would be able to avail concessional rates post the exemption period.

She further added that the Government will give MAT relief for those opting to continue paying surcharge and cess at 22%. MAT has been reduced to 15% from 18.5% for companies who continue to avail exemptions and incentives.

The said measures have been announced with expectation to widen the tax basked with lower tax rate. Economic buoyancy will itself generate revenue, the FM said.

In her closing remarks, the FM said that the new corporate are to be among lowest in SouthEast Asia. The move has been aimed to have more investment in 'Make In India' program of the Government.

On the derivatives front, the NSE's India VIX, a gauge of market's expectation of volatility over the near term, rose 2.02% to 15.8650. The Nifty September 2019 futures were trading at 11,271.45, a premium of 6.1 points compared with the spot at 11,265.35.

On the options front, the Nifty option chain for 26 September 2019 expiry showed maximum call open interest (OI) of 28.08 lakh contracts at the 11,200 strike price. Maximum put OI of 44.84 lakh contracts was seen at 11,000 strike price. The option chain indicates that Nifty will stay between 11,000 and 11,200 in September expiry.

Bond markets, which have been jittery about the government's ambitious tax collection targets, reacted negatively to the news, while equity markets surged.

The yield on 10-year benchmark federal paper surged 0.234 points or 3.38% to 6.858% at 12:18 IST compared with 6.634% at close in the previous trading session.

Shares of IT companies were mixed. Oracle Financial Services Software (up 0.88%), Persistent Systems (up 0.45%), Mphasis (up 0.39%), TCS (up 0.28%) and Infosys (up 0.12%) gained. Tech Mahindra (down 1.68%), MindTree (down 0.68%), Wipro (down 0.65%), Hexaware Technologies (down 0.33%) and HCL Technologies (down 0.17%) declined.

Metal stocks traded higher. Jindal Steel & Power (up 8.92%), Tata Steel (up 8.71%), Vedanta (up 7.68%), Steel Authority of India (up 6.91%), Hindustan Copper (up 6.23%), Hindalco Industries (up 4.62%), Hindustan Zinc (up 3.55%), National Aluminium Company (up 2.91%) and NMDC (up 1.43%) edged higher.

The S&P BSE Metal was up 5.3% at 9,267.86.

Private sector banks rallied. RBL Bank (up 10.64%), IndusInd Bank (up 9.8%), HDFC Bank (up 7.96%), ICICI Bank (up 7.11%), Yes Bank (up 6.09%), Kotak Mahindra Bank (up 4.08%), Axis Bank (up 3.81%) and AU Small Finance Bank (up 2%) advanced.

The Nifty Private Bank index was up 7.57% at 15,947.10.

Among PSU banks, State Bank of India (up 8.34%), Union Bank of India (up 6.85%), Bank of India (up 5.52%), Oriental Bank of Commerce (up 5.08%), Bank of Baroda (up 4.55%), Punjab National Bank (up 4.52%), Syndicate Bank (up 3.93%) and Allahabad Bank (up 2.97%) advanced.

The Nifty PSU Bank index was up 6.23% at 2,506.10.

Auto stocks witnessed strong buying support. Ashok Leyland (up 14.48%), Eicher Motors (up 12.63%), Maruti Suzuki India (up 10.21%), TVS Motors Company (up 10.19%), Tata Motors (up 7.97%), Hero MotoCorp (up 7.4%), Bajaj Auto (up 6.85%) and Mahindra and Mahindra (up 6.04%) advanced.

The S&P BSE Auto index was up 8.2% at 16,823.48.

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