The benchmark Sensex hit 40,000 mark for the first time in four month, while Nifty touched 11,800, after hopes of fresh tax reforms from the government lifted investor sentiment.

At 9.20am, the benchmark Sensex rose 0.4% to 39,977 points, while the Nifty gained 0.73% to 11,830. This is the highest level since 5 July for both indices.

The Prime Minister’s Office (PMO) and the finance ministry are discussing the possibility of abolishing the dividend distribution tax (DDT), a review of tax slabs and a change in the holding period of assets to be eligible for tax savings, according to news agency IANS. The report also said the securities transaction tax and the tax on long-term capital gains above 1 lakh introduced in the 2018 budget were under review.

According to CR Forex Advisors, If the government comes up with any further booster packs, we might see further inflows in the capital market.

"For today, expect some more consolidation with the broader market also seeing more traction as valuation comfort sees smart money buy stocks," IIFL Securities said in a note.

Asian indices opened in the black after most Asian markets gained the most in three months after US stocks edged lower with the Federal Reserve set to announce its policy decision tonight.

"The markets in the near term are likely to be driven by earnings outcome and auto volume numbers, which will be a crucial indicator of a revival in consumer spending. Further, global cues will also induce volatility as expectations are high from the ongoing US-China trade negotiations. Further, the outcome of US Fed meet (scheduled for 29-30 October) will also influence the market trend," according to Ajit Mishra, vice-president, research, Religare Broking Ltd.

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