MUMBAI: The Muhurat impact carried on when equities opened higher on Tuesday. Further boost to sentiments came with a report that suggested rationalisation of direct taxes will give relief to equity investments.
Sensex topped 39,000 and Nifty 11,700, both closing up by around 1.5 per cent, hitting a four-month high.
A television report said the government is looking at tweaking the tax regime to replace long-term capital gains tax (LTCG), dividend distribution tax (DDT) and securities transaction tax (LTT) into a single tax structure.
If it is announced soon and within this fiscal year, it would be the second biggest relief for the markets after the withdrawal of “super rich” tax on foreign portfolio investors.
Ten per cent LTCG on equities introduced in 2018 had dampened market sentiment as market participants were already looking forward to relief in STT and also eliminating double taxation – DDT paid by companies at the rate of 15 per cent comes on top of the tax paid on corporate profits.
“Sources indicated that the government is reviewing equity-related tax rate rationalisation. This boosted investor and trader sentiments. Nifty is eyeing recent high territory. Market volumes were on the higher side,” said Deepak Jasani, head of retail research, HDFC securities.
Tuesday’s rally was broad-based, with almost all the sectors participating, except for the telecom sector, which has been weighed down by the recent Supreme Court ruling that entails a huge outgo when companies are already stressed for cash. Tata Motors continued to march ahead with 16 per cent gains to close at Rs 172.55 on BSE.
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Tata Steel, Yes Bank, Axis Bank and Maruti were all top gainers among the Sensex stocks.
“Markets have gained momentum due to several positive developments. Globally, there was news of US reaching Phase One trade deal with China early next month. On the domestic front it was the news flows regarding the government looking at simplifying various taxes related to equities,” said Siddhartha Khemka of Motilal Oswal Financial Services.