Equity markets slump on PM Narendra Modi’s tax talk | business-news | Hindustan Times
Today in New Delhi, India
May 27, 2017-Saturday
-°C
New Delhi
  • Humidity
    -
  • Wind
    -

Equity markets slump on PM Narendra Modi’s tax talk

Equity markets tumbled around 1% in morning trade on Monday as Prime Minister Narendra Modi’s talk that people earning from financial markets must make fair contribution to tax, worried investors, even as Finance Minister Arun Jaitley tried to calm nerves that there was no plan to levy a long-term capital gains tax.

business Updated: Dec 26, 2016 14:28 IST
HT Correspondent
Equity markets

Equity markets tumbled around 1% in morning trade on Monday as Prime Minister Narendra Modi’s talk that people earning from financial markets must make fair contribution to tax, worried investors.(PTI)

Equity markets tumbled around 1% in morning trade on Monday as Prime Minister Narendra Modi’s talk that people earning from financial markets must make fair contribution to tax, worried investors, even as Finance Minister Arun Jaitley tried to calm nerves that there was no plan to levy a long-term capital gains tax.

The BSE Sensex was down 286 points or 1.1% at 25,754.27 and the wider NSE Nifty50 declined 84 points or 1.1% at 7,901.85.

“For various reasons, the contribution of tax from those who make money on the markets has been low. To some extent, it may be due to illegal activities and fraud. To some extent, the low contribution of taxes may also be due to the structure of our tax laws. Low or zero tax rate is given to certain types of financial income. We should consider methods for increasing it in a fair, efficient and transparent way,” Modi had said after inaugurating a new campus of market regulator Sebi’s National Institute of Securities Markets on Saturday.

However, on Sunday, Jaitley tried to assuage investors saying Modi’s speech has been mis-interpreted and there were no plans for a long-term capital gains tax.

Despite the clarification, there is some nervousness in the market.

“Prime Modi set the cat amongst the pigeons, and his talk led the market participants to assume that the tax exempt status of long-term capital gains on stocks is likely to be removed. Although the Finance Minister categorically clarified that the government does not plan to do so, markets would rather wait for the budget to heave a sigh of relief and until then the speculation may continue,” said Sageraj Bariya, vice president at East India Securities.

Foreign institutional investors’ pulling out also continues to weigh on equity markets. So far in December, FIIs have pulled out Rs 3,744 crore from equity markets following US Federal Reserve decision to increase interest rates by 0.25% and hinting at quicker rate hikes in 2017.

The continued FII selling is hurting investor sentiment, and with no positive trigger visible on the horizon, investors are likely to remain on the sidelines, added Bariya.

Cipla, Axis Bank, Power Grid, ICICI Bank, Bharti Airtel and ONGC were among the major losers on the Sensex in morning trade.