Markets are likely to see more gains on Tuesday as Central Board of Direct Taxes (CBDT) on Monday, to allay foreign investors’ fears, decided to put on hold all minimum alternative tax (MAT)-related tax notices to foreign institutional investors (FIIs).
Already deriving comfort from finance minister’s statement on Thursday to form a committee that will look into the issue, the benchmark Sensex at the Bombay Stock Exchange surged 402 points on Monday to close at a two-week high of 27,507.3. This followed the 506 point rise on Friday that takes total gains over two trading sessions to 908 points or 3.4 per cent.
The government put on hold issuance of fresh notices and any further assessments on levy of this tax on foreign investors to assuage concerns of investors slapped with MAT demand at the rate of 20 per cent on long-term capital gains.
“When the government decided to form a committee, it gave a signal that it does not want to pursue the MAT issue. And today’s CBDT decision clearly signals that they do not want to go ahead. While a part of relief rally has already happened, markets may see some more gains,” said the head of a leading financial services firm.
Analysts said upcoming inflation and factory data along with China’s latest round of monetary easing may prompt the RBI to ease its policy for the third time this year. The sentiment was further boosted by China’s decision to slash interest rates by 25 basis points and strong jobs data from the US.
The Sensex resumed on a positive note on Monday and touched an intra-day high of 27,544.24 before settling 401.91 points or 1.48 per cent higher at 27,507.30. Earlier, it had closed at 27,735.02 on April 23. The index had gained 506.28 points on Friday after finance minister Arun Jaitley referred the MAT issue to a high-level committee. The broader 50-issue NSE Nifty regained the 8,300-mark to hit session’s high of 8,332.75 and concluded 133.75 points or 1.63 per cent higher at 8,325.25.
Sanjeev Zarbade, vice-president, Kotak Securities, said, “the Sensex has continued its bounce back from the lows of the previous week. For today, the global cues were positive. The euro markets ended strongly on Friday on the back of a more decisive-than-expected UK election outcome by the center-right Conservative party.”
The April jobs data in the US also came strong, thus easing concerns of a slowdown. “In addition to this, China cut its interest rates to bolster sagging economic growth. It was an eventful Friday for the global markets. As far as India is concerned, passage of GST and/or land bill would be a strong trigger for the market in the the short term,” he said.
SBI was the biggest gainer on the Sensex with a rise of 5.44 per cent, followed by Vedanta (5.34 per cent) and Hero Motocorp (3.59 per cent).
“We believe markets would now wait to see the impact of reforms undertaken so far on economic growth and earnings before re-rating further,” said a report by Bank of America Merrill Lynch. “We expect markets to remain in a range in Q2CY15 with a negative bias. This is largely on account of slow quarterly earnings, continuation of earnings downgrades, all-time high overweight of FIIs on India, rich valuation and increase in supply of paper. Markets will likely witness another quarter of weak growth in the ongoing earnings season.”
Rupee gains for second straight day, up 9 paise
Mumbai: The rupee ended higher by 9 paise at 63.85 against the US currency on persistent selling of dollars by banks and exporters on hopes of resumption in foreign fund inflows amid rise in equity market. However, dollar’s strength in the global market after strong US jobs data announced last weekend and continued capital outflows, checked the rupee’s gains.
The domestic currency at the Interbank Foreign Exchange (Forex) market, resumed better at 63.85 a dollar and ended at the same level after moving in a range of 63.77 and 64.01, registering a gain of 9 paise or 0.14 per cent. It has gained 38 paise or 0.59 per cent in the last two days. The rupee dropped against the pound at 98.81 from 98.68 previously. ENS