Investors feel the government could slash taxes to boost consumption in the economy which expected to get slow down due to note ban.
Mumbai: The equity markets bounced back sharply on Tuesday amidst a strong rally in index heavyweights after finance minister Arun Jaitley said India now needs lower levels of tax rates to make it globally competitive. The Sensex vaulted 406.34 points or 1.57 per cent while the Nifty ended the day at 8,032.85, gaining 124.60 points or 1.58 per cent.
“The buying sentiment improved after there was an indication from the finance minister Arun Jaitley to lower the indirect tax rates in next year’s budget which will increase competitiveness of the country in the global markets. Considering that consumption has slowed down in the country, the market is also expecting government to cut direct tax rates in next year’s budget which will be beneficial for the consumption related stocks,” said Vaibhav Agrawal, head of research at Angel Broking.
The finance minister’s comments, which buoyed investors sentiment forced traders to cover their short positions ahead of the expiry of the December derivative series. According to the provisional data released by the stock exchanges, foreign portfolio investors (FPI) remained net sellers to the tune of Rs 712.17 crore. India’s volatility index (VIX), which measures investors expectation about the near term volatility dropped 9.16 per cent on the National Stock Exchange (NSE) on Tuesday. The broader markets also participated in the relief rally with 1,712 stocks ending the day higher when compared to 866 stocks that declined.