Markets are expected to rise this week as a reduction in corporate taxes, deferral of GAAR and removal of minimum alternate tax (MAT) for foreign investors have boosted investor sentiment, experts said.
Foreign institutional investors (FIIs), who had stayed away during the special trading session on Saturday, are likely to return with renewed strength, buoyed by the slew of positive tax proposals.
This could revive the market value of top Sensex companies including ITC, ONGC, Reliance Industries Ltd, HDFC Bank and SBI, which had fallen over the past week due to profit-booking.
Both the Sensex and the Nifty witnessed sharp fluctuations during finance minister Arun Jaitley’s budget speech on Saturday. While the Sensex ended 0.4% high, the Nifty rose 0.6% on hopes that the proposals outlined in the budget will boost growth.
“Markets will react as the understanding of the budget evolves,” said Vikas Khemani, CEO, Edelweiss Securities. “The removal of MAT for foreign portfolio investors (FPIs) and the postponement of GAAR (for two years) will build confidence among foreign investors.”
MAT, which was earlier scheduled to be levied on FPIs, would have raised the tax outgo for such investors from 0 to 20% and would have deterred many such firms from investing in India.
Similarly, the deferment of GAAR, which was to be implemented from April 1, 2015, would come as a relief to foreign investors who route their investments into India from tax havens, and were concerned that their transactions would now come under the tax net.
The markets are also likely to react positively to measures suggested for domestic players."The finance minister has indeed boosted corporate and individual sentiment with his resolve to move towards a 25% tax level in the next four years," said Amar Ambani, research head at IIFL. "Other key takeaways are the plug-and-play model for ultra-mega power projects, merging of Forward Market Commission with Sebi and the comprehensive bankruptcy law."