Nifty, Sensex clock best day in 10 years after sharp cuts in corporate taxes

Closing bell

Domestic equity benchmark BSE Sensex vaulted 1,921 points, fuelled by a slew of economy-boosting measures announced by Finance Minister Nirmala Sitharaman.

Read more:Government slashes taxes for corporate, new manufacturing firms

Logging its biggest intra-day spike in over a decade, the 30-share index soared 2,284.55 points to a peak of 38,378.02, before settling 1,921.15 points or 5.32 per cent higher at 38,014.62. Similarly, the broader NSE Nifty zoomed 569.40 points or 5.32 per cent to end at 11,274.20.

Bulls took over the market after the government slashed corporate tax rates for companies by almost 10 percentage points to 25.17 per cent to bring them at par with Asian rivals such as China and South Korea.

The finance minister also said the government will not levy the enhanced surcharge introduced in the Budget on capital gains arising on sale of equity shares in a companies liable for securities transaction tax. Also, the super-rich tax will not apply on capital gains from sale of any security including derivatives in hands of foreign portfolio investors.

In another relief, the finance minister said listed companies which have announced buyback of shares prior to July 5 will not be charged with the super-rich tax. “Markets gave complete thumbs up to the decision as it is expected to give much room for corporate India to reinvest the money into building capacity and fuel growth for the long term while providing immediate support to its waning earnings in the near term,” said Narendra Solanki, Head Fundamental Research (Investment Services) - AVP Equity Research, Anand Rathi Shares & Stock Brokers.

The Sensex and Nifty clocked their highest one-day gain in over a decade on the back of these announcements.

Top gainers in the Sensex pack included Hero MotoCorp, Maruti, IndusInd Bank, Bajaj Finance, SBI, M&M, HDFC Bank, HUL and L&T, rallying up to 12.52 per cent. On the other hand, PowerGrid, Infosys, TCS, NTPC and Tech Mahindra ended in the red, losing up to 2.39 per cent.

The rupee too appreciated 29 paise to 71.04 against US dollar following the finance minister’s announcements. Meanwhile, Brent crude futures rose 0.64 per cent to USD 64.84 per barrel (intra-day).

Elsewhere in Asia, Shanghai Composite Index, Nikkei and Kospi ended on a positive note, while Hang Seng settled in the red. Stock exchanges in Europe were trading higher in their respective early sessions. - PTI

Bullion market

Spot gold prices for 24 Karat in Delhi fell by Rs 170 on stronger rupee.

Gold fell by ₹170 to ₹38,390 per 10 gram in the national capital on strong rupee which rallied after Finance Minister Nirmala Sitharaman announced corporate tax cut, according to HDFC Securities. Silver prices also witnessed correction, declining by ₹120 to ₹47,580 per kilogram from Thursday’s closing price of ₹47,700 per kilogram. Read the bullion market report here

European shares

FTSE 100 slips on firmer sterling. File Photo

European shares were set for their fifth straight week of gains, led by defensive and retail stocks, but gains were limited as investors remained cautious about a wider economic slowdown and progress in US-China trade talks.

A 1.08 per cent increase in the retail sector helped lift the pan-European STOXX 600 index by 0.2 per cent. Investors also bought into the so-called defensive sectors such as healthcare, utilities, real-estate and food and beverage. Read more on the European stock markets here

Wrong to say India on 5% growth trajectory: Bibek Debroy

Bibek Debroy

Chairman of the Economic Advisory Council to the Prime Minister (EAC-PM), Bibek Debroy, it would be incorrect to conclude that India is on a 5-per cent growth trajectory on the basis of just one quarter’s GDP print.

GDP growth in the April-June quarter of the 2019- 20 fiscal was 5 per cent, according to government data. Click here to read more

Shares soar nearly  6%

The shares surged nearly 6 per cent Friday and were set for their best day in more than a decade after the government announced deep cuts in corporate taxes to revive flagging growth.

Finance Minister Nirmala Sitharaman said the effective corporate tax rate would be lowered to around 25 per cent from 30 per cent and scrapped the minimum alternative tax for domestic companies.

Governments and central banks around the world have been loosening monetary and fiscal policies to revive economic growth hurt mainly by the ongoing US-China trade war and weak consumer demand. India's moves are the latest in a raft of measures from the government to lift the economy after growth hit a six-year low in the April-June period, mainly dragged by a slump in private investment.

“The measures announced by the finance minister this morning can be described as a 'New Deal' for the Indian economy,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services. “The psychological stimulus from this ... will be higher than the fiscal stimulus.”

Economists believe that the cuts would make India competitive for investment, as it brings corporate tax rates on a par with other Asian economies. Reserve Bank of India Governor Shaktikanta Das said the moves augur “extremely well” for the economy.

However, the FM said total taxation revenue loss due to the cuts would be about $20.5 billion, raising concerns that the government may not be able to meet its fiscal deficit target for 2019-20 at a time when tax revenue collections are already weak.

Speculation that the government may have to borrow more to meet its expenditure needs for the year led to a spike in benchmark 10-year bond yields to a 2-1/2-month high.

The broader NSE index jumped as much as 5.33 per cent or 570.90 points to 11,275.70, while the benchmark BSE index jumped 5.3 per cent or 1,913.92 points to 38,007.39. Both indexes were set to finish the week about 2 per cent higher. The rupee rose as much as 0.9 per cent to 70.68 against the dollar, its strongest level since Aug. 9.

Top lenders HDFC Bank Ltd and ICICI Bank Ltd soared nearly 10 per cent each, sending the Nifty Bank index up 8.8 per cent. “The markets have been asking for a big fiscal stimulus and the government has delivered,” said Rusmik Oza, head of fundamental research at Kotak Securities in Mumbai.

Corporate earnings may see an almost 12 per cent jump in the next quarter for full tax paying companies due to the cut, and the markets can go up nearly 10 per cent, Oza said, adding that foreign investors would cheer these measures.

The Nifty Auto index jumped 12.4 per cent, its sharpest intraday climb since July 2011, with Eicher Motors Ltd surging 24 per cent. IT firms dipped as the rupee firmed, with Tata Consultancy Services Ltd slipping 1.7 per cent. - Reuters

'Global growth fragile'

File Photo of former IMF chief Christine Lagarde.

Former head of the International Monetary Fund Christine Lagarde has warned that global growth is “fragile” and “under threat” and policymakers should work to reduce manmade vulnerabilities. Lagarde, who officially stepped down as IMF managing director last week, decried certain self-inflicted wounds, saying that issues like Brexit and trade frictions “are manmade and can be man-fixed.” Click here to read more on the Christine Lagarde's take on global growth

Broker's call

ICICI Securities

Tata Power (Buy)

CMP: ₹64.65

Target: ₹87

Tata Power, through its wholly-owned subsidiary Khopoli Investments, announced divestment of its entire 50 per cent stake in Cennergi (Pty) Ltd, a South African joint venture. The proposed buyer is Exxaro (the current JV partner), a leading South African coal producer, which will become the 100 per cent owner of Cennergi. Read our Broker's call on Tata Power here

Sensex regains 38,000 mark

The 30-share BSE index Sensex skyrocketed 2255.70 points or 6.25 per cent to 38,349.17 and the broader index Nifty jumped 671.35 points or 6.27 per cent to 11,376.15 on Finance Minister's economic booster announcemnets.

In an effort to boost investment in the economy, Government announced lowering of corporate tax, effectively by 10 percentage points for existing companies and 12 basis points for the new companies. After the FM's announcements, the benchmark equity index Sensex jumped over 1,000 points and the NSE index regained the 11,000 mark.

The rupee extended the morning gains and rallied 66 paise to 70.68 against the US dollar. In a major relief to foreign portfolio investors, FM Nirmala Sitharaman said Super-rich tax will not apply on capital gains arising from sale of any security including derivatives in hands of FPIs.

Barring the IT stocks, all the major stocks were trading higher in the positive pack. The auto stocks emerged the biggest gainer, as the sector also eyes the GST Council meet outcomes.

Fiscal deficit may touch 4%

How will the Centre meets its fiscal target?

The Finance Minister Nirmala Sitharaman’s corporate tax rate cut has cheered India Inc and equity market. But bond markets have reacted negatively, as the yield on 10-year G-Sec climbed 20 basis points post the FM’s announcement.

What is bothering the bond markets is the ₹1.45 lakh crore revenue foregone figure due to reduction in corporate tax rate that can upset the 3.3 per cent fiscal deficit target number. Click here to read more on the impact of corporate tax rate cut on fiscal deficit

Sensex, Nifty could rally to new highs

Market cap of listed companies were up by Rs 6 trillion in few hours of trading. File Photo

Sensex gained more than 1,900 points or over 5 per cent while the Nifty index rose by 562 or over 5 per cent. India has cut its effective corporate tax rate to 25 per cent from an earlier rate of 35 per cent. Also, a new tax rate of 15 per cent for new manufacturing units was announced by finance minister Nirmala Sitharaman.

Experts are calling it game changer announcements for the stock markets. Click here to read more on the experts opinion on stock markets following FM announcements

Broker's call

Kotak Securities

JK Paper (Buy)

CMP: ₹132.05

Target: ₹170

Demand growth is expected to remain muted in 2QFY20 and foresee improvement from 3QFY20 onwards. However, lower realisation and weak performance at Sirpur, would negate the benefit. Read our Broker's call on JK Paper here

What does the rate cut announcement mean for India Inc

Union Finance Minister Nirmala Sitharaman

The Finance Minister Nirmala Sitharaman’s festive bonanza is sure to bring cheer to India Inc. The much awaited cut in corporate tax rate will be a significant relief for the 7 lakh-odd companies in the non-manufacturing space, paying an effective tax rate at about 30 per cent. For the 1.3 lakh manufacturing companies, whose effective tax rate is currently about 27.8 per cent, the respite is lower but substantial enough to cheer the markets. Here's what it means for India Inc

Yes Bank stocks bounce back

Yes Bank  shares rebounded, rising sharply by over 8 per cent, after one of the promoter entities of the company sold a part of its stake. The scrip, which faced severe drubbing in the previous trade, jumped 8.21 per cent to ₹58.60 on the BSE on Friday. On the NSE, it advanced 8.41 per cent to Rs 58.65.

Stocks poised for biggest jump in a decade

Stocks surged with the rupee while bonds slumped after the government unexpectedly slashed the corporate tax rate to boost economic growth.

The Sensex jumped nearly 5 per cent, poised for its best gain since May 2009, led by banks and automakers. The rupee climbed 0.6 per cent against the dollar. The yield on 10-year bonds surged 20 basis points, the most for the benchmark notes since Feb. 2017, to 6.85 per cent.

The 30-share BSE index surged 1,798 points or 4.98 per cent to 37,891.47 while the 50-share NSE index Nifty jumped 532.40 points or 4.97 per cent to 11,237.20

Tax on domestic companies will be slashed to 22 per cent from 30 per cent, Finance Minister Nirmala Sitharaman announced. The effective new rate will be 25.2 per cent including all additional levies and is applicable only for companies. The move follows announcements over the past month to boost consumer demand, bolster imports and attract investments into the country.

The measures aren't a patchwork but are real agents that will help revive growth, Rajiv Singh, Hyderabad-based chief executive officer at Karvy Stock Broking Ltd. The fiscal deficit is a concern but at this time, growth should take priority.

The stock market saw a heavy sell-off this quarter with foreign funds dumped a net $4.9 billion of the nations stocks from June to Sept. 18, on course for the biggest quarterly exodus since at least 1999. The Sensex index entered a correction on Thursday after falling 10 per cent from a high reached on June 3.

Industry groups has been demanding that the government should use the fiscal space afforded to it last month by a more than $24 billion windfall from the Reserve Bank of India to revive the economy. The governments measures to reverse the slowdown have so far come in tranches and were seen as inadequate.

Investor sentiment will turn positive as the tax cut will help corporate profitability, increase business confidence and thus throws open a prospectus of better valuations of firms. - Bloomberg

Commodities market

Crude oil prices rose on Friday after a Saudi-led coalition launched a military operation north of Yemen's port city of Hodeidah, as the US worked with West Asian and European nations to build a coalition to deter Iranian threats after the Saudi attack..

Oil prices were on track for a more-than-7 per cent jump this week, their biggest in months, as early trading saw gains extended on fresh tensions in West Asia after a key Saudi Arabian supply hub was knocked out in an attack last weekend. Brent crude is on track to rise about 7.7 per cent this week, the biggest weekly gain since January. The front-month November contract was at $64.96 a barrel, up 56 cents, by 0212 GMT. Click here to read the commodities market report

Investors wealth spikes

Led by the spike in equities, the market capitalisation of BSE-listed companies climbed Rs 2,11,086.42 crore. File Photo

Domestic investor wealth soared by ₹2.11 lakh crore in morning trade as equity market rallied following a slew of economy-boosting announcements by Finance Minister Nirmala Sitharaman. Led by the spike in equities, the market capitalisation of BSE-listed companies climbed ₹2,11,086.42 crore to ₹1,40,79,839.48 crore. From the 30-share Sensex basket, barring NTPC, all other 29 scrips were trading in the green led by Tata Steel, Maruti Suzuki India, HDFC Bank and Yes Bank, which were trading with gains of up to 5.7 per cent. Read more on the Sensex movement and investors wealth here

Gold and precious metals

Spot gold stuck in narrow range of $1,488-$1,514/oz.

Gold prices edged higher on Friday and were set for their first weekly gain in one month, supported by a softer dollar and caution about developments in Sino-US trade talks. Spot gold was up 0.3 per cent at $1,503.20 per ounce, as of 0353 GMT, and was on track for its first weekly gain in four, having risen nearly 1 per cent so far this week.

US gold futures were also up 0.3 per cent at $1,510.9 per ounce. Gold prices have risen about 17 per cent this year mainly on the back of a the US-China trade tensions, concerns over the outlook for the global economy and the prospect of monetary easing by central banks. Read more on the gold and other precious metals market here

Rupee rallies 66 paise

Rupee rallies 66 paise

The rupee extended the morning gains and rallied 66 paise to 70.68 against the US dollar after Finance Minister Nirmala Sitharaman announced several measures to promote investment and growth.  In a major relief to foreign portfolio investors, FM Nirmala Sitharaman said Super-rich tax will not apply on capital gains arising from sale of any security including derivatives in hands of FPIs. Read the local currency report here

Sensex, Nifty zoom

Domestic equity benchmark BSE Sensex skyrocketed over 1,400 in morning session after Finance Minister Nirmala Sitharaman announced a slew of measures to revive the ailing economy. The broader index Nifty zoomed to 11,184.55.

In a major booster to the market, the government has decided to not levy the enhanced surcharge introduced in the Budget on capital gain arising on sale of equity shares in a companies liable for securities transaction tax. Also, the super-rich tax will not to apply on capital gains from sale of any security including derivatives in hands of foreign portfolio investors.

In another relief, the minister said listed companies which have announced buyback of shares prior to July 5 will not be charged with super rich tax. The government has also slashed corporate tax to 25.17 per cent inclusive of all cess and surcharges for domestic companies.

Sitharaman said the revenue foregone on reduction in corporate tax and other relief measures will be Rs 1.45 lakh crore annually. This, she said, is being done to promote investment and growth.

The 30-share index zoomed 1486.29 points, or 4.12per cent, to 37,579.76, while the broader Nifty rose 425.70 points, or 3.98 per cent, to 11,130.50.

Top gainers in the Sensex pack included Maruti, M&M, HDFC Bank, Tata Motors, Yes Bank, Tata Steel, L&T, ICICI Bank, Bajaj Auto and RIL, rallying up to 9 per cent. On the other hand, TCS and NTPC were trading in the red.

The rupee too appreciated 66 paise to 70.68 against US dollar following the finance minister’s announcements. -PTI

US markets

The S&P 500 was than less than 1% below its closing record high hit in July. File Photo

Wall Street ended mixed on Thursday, with a gain in Microsoft offsetting a dip in Apple, a day after the Federal Reserve cut interest rates as expected and left the door open for further monetary easing.

Microsoft rose 1.8 per cent after unveiling a $40 billion stock buyback plan, while Apple declined 0.8 per cent and the S&P 500 ended virtually unchanged. The S&P 500 was than less than 1 per cent below its closing record high hit in July as investors became more optimistic about the resumption of talks between the United States and China aimed at laying the groundwork for high-level trade negotiations in early October. Read the US stock market report here

FM slashes corporate tax

Finance Minister Nirmala Sitharaman

Finance Minister Nirmala Sitharaman in a press conference proposed to slash corporate tax for domestic companies, new local manufacturing companies through an ordinance. She said any domestic company will get an option to pay income tax at a rate of 22 per cent subject to condition that they will not avail any incentive.

Effective tax rate for new manufacturing companies will be 17.01 per cent inclusive of all surcharge and cess. Click here to read more on the Finance Minister's statement on corporate tax

Sensex, Nifty jump on FM statement

The 30-share BSE index Sensex jumped 779.60 points or 2.16 per cent to 36,873.07 and the 50-share NSE index surged 121.90 points or 1.68 per cent to 10,884.65. Finance Minister Nirmala Sitharaman announced a proposal to slash corporate tax for domestic companies, new local manufacturing cos through an ordinance.

Any domestic company gets an option to pay income tax at a rate of 22 per cent subject to condition that they will not avail any incentive, the Finance Minister said. Companies opting for 22 per cent income tax slab won’t have to pay minimum alternative tax; effective rate will be 25.17 per cent including surcharges, cess, she added.

Rupee market

At the interbank foreign exchange the rupee opened at 71.19.

The rupee appreciated by 27 paise to 71.07 against the US dollar in early trade on Friday as gains in domestic equity market enthused investors. At the interbank foreign exchange the rupee opened at 71.19, then gained further ground and touched a high of 71.07, registering a rise of 27 paise over its previous close.

Forex traders said weakening of the US dollar vis-a-vis other currencies overseas and higher opening in domestic equities supported the rupee. Read more on the local currency market here

Forex market

The Swiss National Bank, the Bank of England and the Bank of Japan kept their policies on hold on Thursday. Their currencies rose and mostly held gains in Asian trade.(file photo)

The dollar nursed losses against most major currencies, as central banks in Switzerland and the UK refrained from following the Federal Reserve in cutting rates, while risk appetite ebbed on caution about US-China trade talks.

Sterling hit a two-month high of $1.2560 against the greenback overnight after European Commission President Jean-Claude Juncker said he thought Brussels could reach a deal with Britain to leave the European Union. Click here to read the full report on forex market

Sensex marginally higher

Domestic equity benchmark BSE Sensex rebounded over 100 points in early session, driven by gains banking, auto and IT stocks amid positive domestic and global cues.

The 30-share index was trading 27 points, or 0.07 per cent, higher at 36,120.47, while the broader Nifty slipped 7.45 points or 0.07 per cent, to 10,679.35. In the previous session, the BSE barometer ended 470.41 points, or 1.29 per cent, lower at 36,093.47, while the Nifty plunged 135.85 points, or 1.25 per cent, to settle at 10,704.80.

Top gainers in the Sensex pack in early trade included Yes Bank, HDFC Bank, Maruti, Hero MotoCorp, Kotak Bank, HUL, M&M, Bajaj Auto and IndusInd Bank, rising up to 2.22 per cent. On the other hand, NTPC, PowerGrid, ONGC, Axis Bank, SBI, Tata Motors, Asian Paints, ITC and HCL Tech fell up to 2.46 per cent.

According to experts, rate cut hopes and a slew of measures taken by the government to boost the ailing economy has boosted investor sentiment here.

After four successive rate cuts this year, Reserve Bank governor Shaktikanta Das on Thursday said “there is more room” to do so given the growth deceleration and stable inflation that is likely to stay below target for a year or so.

Further, in a bid to boost lending, the government on Thursday asked public sector banks to hold loan melas in 400 districts to lend to desirable shadow banks and retail borrowers, and said no stressed loan account of MSMEs will be declared an NPA till March 2020.

Finance Minister Nirmala Sitharaman, who has since her maiden Budget on July 5 announced measures in three tranches for boosting the economy, held a meeting with heads of public sector banks (PSBs) on Thursday to review liquidity or money flow in the system and transmission of lower benchmark interest rates to borrowers.

Market is now awaiting cues from the GST Council which is scheduled to meet later in the day to decide on tax moderation, keeping in mind the revenue position and the need to boost sagging economic growth.

On the global front, resumption of trade talks between the US and China also buoyed market mood, traders said. Bourses in Shanghai, Hong Kong, Tokyo and Seoul were trading on a positive note in their respective late morning sessions. On Wall Street too, bourses too ended on a positive note on Thursday.

The rupee, meanwhile, appreciated 21 paise against its previous close at 71.12 in early session. Global oil benchmark Brent crude rose 0.33 per cent to 64.61 per barrel (intra-day). On Thursday, foreign portfolio investor sold shares worth a net of Rs 892.52 crore, while domestic institutional investors bought equities worth Rs 645.72 crore, provisional data showed. (PTI)

GST Council meet

States may seek simplification of returns for bigger assessees

The 37th meeting of the GST Council, to be chaired by Finance Minister Nirmala Sitharaman on Friday, is expected to witness States raising issues beyond the formal agenda. Indications are that given the views of the Fitment Committee (Committee of tax officials from Centre and States which give its views on tax revision proposals), rate cuts for automobile and biscuits, may not happen. However, rate revision for hotels, outdoor catering and matchsticks, beside some small items may happen. Read more on the expectations from the GST Council meet

Global markets

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.15 per cent

Asian share prices inched higher as economic stimulus around the world eased fears over slowing growth, while crude oil prices climbed on concerns that last weekend's attacks on Saudi Arabia's oil facilities still pose supply risks.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.15 per cent though it is on course to post its first weekly decline in five, hit by sizeable losses in Hong Kong and India. Japan's Nikkei rose 0.46 per cent to come within striking distance of its year-to-date peak and US and European shares also stood near their best levels this year. Click here to read the full report on the global stock markets

Stocks in focus

The GST Council will hold a crucial meeting on Friday to decide on tax moderation, keeping in mind the revenue position and the need to boost sagging economic growth. Demands have been pouring in from sectors such as automobile, FMCG, and hotels for a reduction in tax rates in the wake of the economic slowdown. Market participants and investors will closely monitor the outcome of the Council’s meeting, held amidst expectation of a sharp tax cut for the automobile sector .

Eros Now said on Thursday it is tying up with Microsoft’s Azure cloud platform to host and stream its digital video offerings, in a boost to the US software giant’s push to expand in the Indian market. As part of the tie-up, Microsoft will build an online video platform for the Bollywood production house, which will offer interactive voice search features in multiple Indian regional languages. Eros Now is the digital OTT entertainment service of Eros International Plc.

The board of directors of Future Supply Chain Solutions will meet on Friday to consider fund-raising proposals. The board may consider raising funds through issue of securities via private placement, preferential issue, qualified institutional placement or any other method or combination. Shareholders would be keen to know the quantum of funds the company plans to raise as well as the mode. If it considers a QIP, then the price and the number of shares to be offered will be crucial factors.

Opening bell

The 30-share BSE index Sensex opened 121.45 points higher at 36,214.92 against the previous close of 36,093.47. The 50-share NSE index Nifty was trading 9.8 points higher at 10,714.60 against the previous close of 10,704.80.

Day Trading Guide

Given below are supports and resistances for Nifty 50 futures and seven key stocks that can help in your intra-day trading:

₹1100 • HDFC Bank

₹821 • Infosys

₹236 • ITC

₹124 • ONGC

₹1178 • Reliance Ind.

₹274 • SBI

₹2102 • TCS

10711 • Nifty 50 Futures

S1, S2 : Support 1 & 2; R1, R2: Resistance 1 & 2.

Today's pick

We recommend a sell in the stock of Exide Industries at the current levels of Rs 169.1. On Thursday, the stock tumbled almost 3 per cent breaching an immediate support at ₹173. This fall has strengthened the downtrend. The short-term outlook is bearish for the stock. Read our stock recommendation of Exide Industries here

COMMENT NOW