Bulls returned on Tuesday to take charge of proceedings on Dalal Street, with the bellwether Sensex gaining over 400 points following the sharp fall of 233 points on Monday.
The sharp rise followed a clarification by Finance Minister Arun Jaitley on Prime Minister Narendra Modi’s statement on taxing income from the stock market.
Providing a sense of comfort to investors Jaitley underlined the need to have globally compatible tax rates to broad-base the economy. Speaking at the National Academy of Customs, Excise and Narcotics on Tuesday he allayed fears of marketmen, clarifying that the government has no intention of imposing tax on long-term capital gains on earnings from the stock market.
While the Sensex breached the 26,000-mark gaining 406 points or 1.57 per cent to close at 26,213, the broader NSE Nifty bounced back from a seven-month low to close at 8,032, up 125 points. The Sensex on Tuesday notched up the biggest single-day gain in three weeks.
Vinod Nair, Head of Research, Geojit BNP Paribas Financial Services, said the markets saw a broad-based relief rally supported by the Finance Minister’s comment on competitive tax structure, compared with Monday’s interpretation of possible capital gains tax.
“The domestic market is expected to be volatile due to expiry of derivative contracts this week and uncertainty still prevailing over the extent of impact on earnings due to demonetisation,” he said.
Among the top companies, ITC emerged as the biggest gainer rising 4.02 per cent, followed by Tata Steel (3.23 per cent). Other major gainers were Adani Ports (2.87 per cent), ICICI Bank (2.25 per cent), Lupin (2.13 per cent) and State Bank of India (1.88 per cent).
The mid- and small-cap indices on the BSE gained 197 points and 172 points, respectively, buoyed by the Finance Minister’s announcement to make manufacturing more competitive in India.
‘Be more competitive’Jaitley said, “You need to manufacture products and provide services which are more competitive in character and, therefore, your taxes have to be globally compatible. Competition is not merely domestic, competition is global.” Globally, investor participation continues to remain muted due to holiday mood and lack of any major triggers. Foreign funds sold shares worth ₹1,100 crore on Tuesday and debt worth ₹1,918 crore, according to data released by NSDL. Overseas, European stocks were trading higher as key indices such as Frankfurt, Paris and London’s FTSE rose by up to 0.14 per cent.