The Sensex opened almost 200 points up on Thursday morning, a day after finance minister Pranab Mukherjee proposed the new tax code that aims to simplify the structure and procedures of the manner in which individuals pay taxes.
The Sensex closed with a gain of 498 points or 3.3 per cent during the day to close at 15,518 points. The Nifty closed at 4,605 points with a gain of 147 points or 3.3 per cent.
“The direction of the code is very positive as it looks to rationalise the processes, reduction of litigation and reduction of surcharge,” said Sudip Bandyopadhyay, managing director, Reliance Money. “Any move that simplifies the maze of taxation is welcome and the Indian markets have given a vote of confidence to it.”
“The rationalisation of tax slabs and the introduction of EET would result in a higher disposable income in the hands of consumers, leading to greater opportunity for economic growth and wealth creation,” said A Balasubramanian, CEO, Birla Sun Life Mutual Fund.
While the simplification of the tax structure played an important role in the bourses rising, IIP data also played a part. The index of industrial production (IIP) for the month of July went up by 7.8 per cent, the highest in 16 months. “Markets’ reaction is a mix of the good IIP data followed by the new code,” said Anup Bagchi, executive director, ICICI Securities. “The market believes that buoyancy due to broad-basing will make up for any apparent loss in revenues for the government.”
The market also got a thrust from the global markets, which rose after a statement by the US Federal Reserve that the country’s economy appears to be coming out of recession. Also two major European nations, Germany and France, showed growth in the second quarter.
While Dow Jones was up 1.3 per cent on Wednesday, Hang Seng rose 2.1 per cent on Thursday. Most of the European markets were trading in the green in the afternoon hours.
Back in India, the realty index was up by 6.9 per cent giving the maximum thrust to the Sensex. Metal and Auto indices followed, with gains of 5.6 per cent and 4.4 cent respectively.