Mumbai: There seems to be a strange connection between Friday and the stock markets. Over the last five weeks, markets have gained every Friday and the trend reversed in the time in between. This Friday was the biggest of them all, and the markets gained a whopping 1,921 points on the BSE Sensex and 570 points on Nifty.
The weekly change was 629.93 points the on BSE Sensex or 1.68%, to close at 38,014.92 points. Nifty gained 198.30 points, or 1.79%, to close at 11,274.20 points. The broader markets saw BSE100, BSE200 and BSE500 gained 2.05%, 2.12% and 2.03%, respectively. The BSE Midcap was up 3.33%, while the BSE Smallcap gained 1.47%.
Press conferences by Finance Minister Nirmala Sitharaman have been held typically post-market at 4 pm or 4:30 pm Friday. This was the first time that it was held in the morning. It certainly should have rung a bell in the mind of the canny investor or trader.
Secondly, it was on the eve of the departure of the Prime Minister on his week-long trip to the United States, which includes the event ‘Howdy Modi’ and the United Nations General Assembly (UNGA) meeting. The punters were actually outmaneuvered in this exercise.
Sitharaman announced a cut in corporate tax to 22% plus surcharge for those who did not take exemptions. This would make the peak rate at 25.17%. It also reduced MAT (minimum alternate tax) to 15%. The Minister also introduced a new tax rate of 15% plus surcharge becoming effectively 17.01% for new companies incorporated after October 1, 2019, and commencing production before March 31, 2023. Very clearly, this section is to induce American companies looking to find alternative places to relocate after Donald Trump has asked them to shut down China operations.
At this tax rate, India becomes competitive with its other South East Asian competitors. Earlier, the government had allowed 100% FDI in contract manufacturing.
It is widely expected that generalised system of preferences (GSP), which was enjoyed by India and recently discontinued would be restored. This would help India enjoy preferential treatment in its foreign trade. Further some sort of agreements on energy security and American companies coming to India to set up manufacturing bases are expected. This would boost the ‘Make in India’ program and help in kick-starting the Indian economy.
The GST council has also made changes in the GST applicable to hotel rooms, where, if the room tariff is upto `1,000, there would be no GST. In the bracket of `1,000 to `7,500, it would be 12%, and at 18% for rooms above `7,500. This would act as a boost for the tourism industry. Further, the GST on aerated drinks has been increased from 18% to 28% plus 12% additional cess.
Coming to the Friday factor, one can see it all began with Friday, August 23, when the BSE Sensex rallied from the low of the day to gain 598 points and 228 points on a closing basis. Similar values on Nifty were 192 points intra-day and 88 points on closing basis. Friday August 30, BSE Sensex intra-day gained 503 points and 264 points on closing. Similarly, the Nifty gained intra-day 149 points and on closing basis, 75 points.
