By SM.20 Sep, 2019
Domestic stock markets skyrocketed on Friday with the Sensex index clocking its biggest single-day gain in more than a decade, after Finance Minister Nirmala Sitharaman announced a cut in corporate tax rate for companies. The Sensex zoomed as much as 2,284.55 points to touch 38,378.02 during the session, hours after the Finance Minister said the effect corporate tax rate for companies will be 25.2 per cent including all additional levies. That marked the largest single-day jump in the Sensex since May 18, 2009, when it had shot up 2,110.79 points. The broader Nifty benchmark index climbed as much as 677.1 points to hit 11,381.90 - a level last seen on July 23. Analysts say the reduction in corporate tax rate is a big positive for the markets.
The Sensex ended 1,921.15 points higher at 38,014.62 - its highest closing level recorded since July 22. The Nifty climbed 569.40 points to settle at 11,274.20 - its highest since July 26.
Top percentage gainers on the 50-scrip index were Eicher Motors, Hero MotoCorp, IndusInd Bank, Bajaj Finance, Maruti Suzuki and State Bank of India (SBI), each clocking a double-digit percentage jump of between 10.11 per cent and 13.38 per cent. HDFC Bank, Reliance Industries, ICICI Bank and Kotak Bank were the top contributors to the surge in Sensex.
The new tax structure is effective from April 1, 2019, and new companies formed from October 1 will attract a base tax rate of 15 per cent, instead of 30 per cent, the Finance Minister said.
In a press briefing ahead of the 37th meeting of the GST Council, the Finance Minister said the total revenue foregone for reduction in corporate tax rate and other measures is estimated at Rs. 1.45 lakh crore per year.
Analysts said that the measures to lower the corporate tax outgo on domestic companies boosted investors" sentiment.
"It is a very positive move that we expected from budget... Most high tax-paying companies, private sector as well as public sector, will benefit from the corporate tax measures," AK Prabhakar, head of research at IDBI Capital Market Services, said.
The government has in the past four weeks announced a number of measures aimed at boosting the economy, which grew at the slowest pace in six years in the quarter ended June.
The Nifty Auto sectoral index - comprising shares in manufacturers of cars, motorcycles, heavy vehicles, auto ancillaries etc. - ended 9.90 per cent higher. All 15 stocks on the index finished higher, gaining 4.50 per cent and 19.35 per cent.
"Companies like ITC, Nestle, Colgate-Palmolive and auto makers, and even profitable PSU companies which pay high taxes, are likely to be among beneficiaries of these moves," he added.
A number of measures - from the rollback of higher taxes on foreign investors to a mega bank merger plan - have been announced to push consumption and investments.