Investors are expecting finance minister Nirmala Sitharaman to announce measures that will boost investor sentiment and help arrest an economic downturn.
On Friday, Sitharaman and senior finance ministry officials met representatives of financial market participants, as well as foreign portfolio investors (FPI), to hear their grievances.
Executives who attended the meeting said the minister and government officials listened to them with an open mind.
The Sensex ended at 37,581.91, up 254.55 points, or 0.68%, while the Nifty closed at 11,109.65, up 77.20 points, or 0.70%. FPIs sought a review of the increase in the surcharge on the income tax outgo announced in the budget, relief on long-term capital gains tax, easier “know your customer" (KYC) norms, a stable tax regime, and ease of doing business, according to executives who attended the meeting. There, however, was no firm commitment from the government on the kind of relief that may be offered.
Lobby group Confederation of Indian Industry said in a statement, quoting Sitharaman after a closed-door interaction on Friday, that the minister will travel around the country to find out whether businesses are being harassed by tax officials. The move follows criticism of the income tax department by industry executives following the recent death of Café Coffee Day founder V.G. Siddhartha in an apparent suicide.
The minister assured businessmen that the controversial penal provision in the latest amendments to the Companies Act for defaults on corporate social responsibility norms will be reviewed, the statement added. “Sitharaman mentioned that she would review the provision on criminal penal provisions."
According to Vinod Nair, head of research at Geojit Financial Services Ltd, indications that the government may announce measures to boost private investments and relax super-rich tax for FPIs fuelled positive momentum in the market. “Profit booking was seen in defensive segments like IT stocks, but the rally was broad-based," he said.
Nair, however, added that the trend may be unpredictable in the near-term. Nevertheless, stability in taxation, ease in liquidity, supportive measures and fall in interest rates will benefit the economy in the second half of the year.
Analysts also said there was optimism in markets on RBI’s move to slash interest rates in its monetary policy review on Wednesday. Sanjeev Zarbade, PCG Research, Kotak Securities, said: “Markets turned hopeful expecting some form of respite from the government after RBI cut the policy rate by 35bps, while underlying trends in Q1FY20 results and management commentary on domestic economy remained weak."
Zarbade, however, cautioned that post the earnings session, expected earnings per share for the Nifty in FY20 will have to be toned down, which would push up valuations, thus limiting upside in the short term. “Upside may come from any concrete measure, which the government proposes, to reverse the pessimism and lift investor confidence."
Meanwhile, data from the Association of Mutual Funds in India showed that equity mutual fund schemes received net inflows of ₹8,133.21 crore in July, up 5.07% from the previous month. The inflows, however, are 14% lower than the ₹9,452 crore in July 2018. Redemptions from equity schemes rose 4.69% from a month ago to ₹12,173.81 crore. In July 2018, redemptions were at ₹11,628 crore.
During the month, inflows from systematic investment plans saw a marginal increase. The total amount collected through SIPs in July was ₹8,324.28 crore against ₹8,122.13 crore in June.