Analysts applaud FM’s bonanza; say market to reverse course now
Sitharman on Friday unveiled a slew of measures ranging from a rollback the additional surcharge on foreign portfolio investors (FPIs) and domestic investors which she had introduced at the Union Budget in July.
They expect the market to open with a large gap up when it opens for trade on Monday.
Sitharman on Friday unveiled a slew of measures ranging from a rollback the additional surcharge on foreign portfolio investors (FPIs) and domestic investors which she had introduced at the Union Budget in July, to immediate recapitalisation of public sector banks (PSBs) and a bouquet of measures to ease a taxpayers’ woes.
Sitharaman said banks decided to pass on any MCLR rate cut in full, and banks will launch repo-linked loan products. Such transmission of repo rate cuts will provide a major boost consumption, analysts said.
She said she would also come out with two sets of announcements in the days to come.
“It shows the concerns and care of the government. In the past couple of months, it was felt they are not concerned. Some of the measures such as recapitalisaion of PSBs and doubling of deprecation on vehicle purchases are smart moves,” said Amisha Vora, joint managing director of brokerage firm Prabhudas Lilladher.
“She said there would be no harassment from the tax department. There was so much of fear that had built up. This would be a major help,” said Vora.
“Taking off the surcharge from FPIs and others was a step in the right direction. It was like they said: ‘If we commited a mistake , we can correct them.’ The intent was very credible,” she said.
In the Union Budget, the government had increased the surcharge to 25 per cent from 15 per cent on those with taxable income of Rs 2-5 crore and to 37 per cent from 15 per cent for income above Rs 5 crore.
This also impacted FPIs operating as trusts or as association of persons. FPIs have pulled out a net of $3.1 billion from Indian shares since the start of July.
“The withdrawal of the enhanced surcharge on FPIs is a big positive for the Indian market, as it could reverse the outflows seen since Budget. It should also help the rupee appreciate. Overall, it’s a good sentiment booster for Indian economy" said Rusmik Oza, head of fundamental research, Kotak securities.
That was the consensus view.
Sunil Sharma, Chief Investment Officer, Sanctum Wealth Management, said the measures would go a long way in addressing the expectations of investors and equally importantly, improving consumer confidence. “We expect the market to open with a gap-up on Monday morning, and the process of restoration of growth via reforms is underway,” said Sharma
“These measures will go a long way in reassuring investors of a pro-growth agenda. In large part, financial markets sold off on a disappointing budget. Investors will draw comfort from the measures announced today and the process for growth recovery has started,” Sharma said.