Mumbai: Indian stock markets made a blockbuster rally on Friday riding on the fiscal stimulus package announced by finance minister Nirmala Sitharaman. The benchmark indices saw their biggest single-day jump in a decade. The BSE Sensex closed at 38,014.62, up 1921.15 points, or 5.32%, while the Nifty was at 11,274.20, up 569.40 points, or 5.32%. The BSE Midcap index ended with a gain of 6.28%, while the BSE Smallcap index rose 3.94%.
Earlier, the Sensex gained 2,111 points on 18 May 2009, making today’s rally the biggest intra-day gain of Sensex. Percentage-wise, the Sensex was up 6.15% on 16 May 2014 when Prime Minister Narendra Modi had formed the government for the first time after winning the general elections with a thumbing majority. Similarly, the Nifty’s earlier biggest intra-day gain was 713 points on 18 May 2009. Percentage-wise, it surged the most (5.3%) on 16 May 2014.
Investor wealth rose by ₹7 trillion as market capitalization of all companies listed on the BSE climbed to ₹145 trillion at the end of trade on Friday.
Auto companies such as Hero MotoCorp (up 12.52%) and Maruti (10.89%) were the top gainers among Sensex companies. Even bank and financial companies, including Bajaj Finance, SBI, HDFC Bank and ICICI Bank, gained 7-10% on Friday. However, technology companies such as Infosys, TCS and Tech Mahindra lost 0.35-2% in a single day.
The government on Friday slashed the corporate tax rate for companies that do not avail of any tax incentive to 22%. The effective corporate tax rate after surcharge will be 25.17%. New manufacturing companies will have to pay an even lower corporate tax rate of 15%.
At present, business income is taxed at 30%, excluding cess and surcharge, other than companies with sales of up to ₹400 crore, and new manufacturing companies that are taxed at 25%. The tax rate cuts are likely to encourage businesses to invest more at a time when the economic growth rate has slowed to a six-year low of 5% in the June quarter.
Vinod Nair, head of research, Geojit Financial Services Ltd, said the new corporate tax reforms by the government will help revive the economic outlook in the coming quarters. “Foreign institutional investors (FIIs) now have a good reason to come back to India and this progressive step will stimulate consumption and ignite the capex cycle. Additionally, companies will get more elbow room to pass on benefits to customers, which in-turn will improve earnings visibility."