FM's clarification on capital gains tax could see markets recover on Monday

Ambareesh Baliga, an independent market analyst believes the markets want 'more of the same' in terms of income tax-related policies - continuity amid a stable regime

Finance Minister Nirmala Sitharaman has denied the reports that the Income Tax (I-T) Department is planning to introduce changes in the capital gains tax structure in case the government is voted back to power in the ongoing Lok Sabha 2024 polls.

“Wonder where this is come from. Was not even double checked with @FinMinIndia. Pure speculation," FM Sitharaman said on social media ‘X’ while reacting to a tweet made by a news channel claiming that the I-T department is planning to impose uniform treatment for all asset classes.

Ambareesh Baliga, an independent market analyst believes the markets want ‘more of the same’ in terms of income tax-related policies.

Click here for top stock market gainers and losers on May 03

“The government will not look to change the current tax policies if it is voted back to power, and that’s what the markets, too, want – policy continuity and a stable regime,” he said.

The ‘capital gains’ rumour mill worked over-time on Friday, May 03, and sent the stock markets crashing with the S&P BSE Sensex ending 733 points, or 0.98 per cent lower at 73,878 levels. The index hit an intra-day high of 75,095.18 levels on May 03, slipped to a low of 73,467.73 levels during trading hours on Friday before recovering partially by close of trade.


 

The Nifty 50, on the other hand, closed at 22,476, down 173 points or 0.76 per cent.

Meanwhile, in the broader market, the BSE Midcap index slipped 0.21 per cent to end at 42,414.53 levels, while the SmallCap index on the BSE shed 0.55 per cent to close at 47,191.41 levels.

Key events next week

Analysts say the FM’s clarification could see the markets stage a bounce-back on Monday, provided the global cues remain supportive and March 2024 quarter corporate earnings do not disappoint.

“The markets experienced volatility throughout the week, ultimately ending nearly unchanged amid conflicting signals. Looking ahead to the next week, attention will be on earnings reports and global market performance, particularly in the US," said Ajit Mishra, senior vice-president for research at Religare Broking.

The market, analysts said, will also remain vigilant about the Bank of England (BoE) policy and gross domestic product (GDP) data from the euro-zone.

Back home, the next batch of Q4 earnings reports will also drive stock-specific movements and will be on investor's radar. DR Reddy's, Hero MotoCorp, Larsen & Toubro (L&T), BPCL, State Bank of India (SBI), Eicher Motors and Tata Motors are some of the prominent companies that are scheduled to announce their March 2024 quarter results in the coming week.

“A close below 22,400 for the Nifty 50 can see the index slip towards the 22,200-21,850 range. On the upside, resistance is expected in the 22,750-22,900 zone in case Nifty 50 moves higher,” Mishra added.

While most sectors are contributing positively except for information technology (IT), Vinod Nair, head of research at Geojit Financial Services believes the performance of bank stocks will also influence the overall market sentiment.

“It's advisable to consider hedged positions and await clearer signals before making significant moves,” he said.