In last one hour of trade today, there was seen short covering as the news report of the finance ministry deciding to withdraw higher surcharge imposed on FPIs provided the much needed relief. In the Budget announced on July 5, the FM has imposed a higher tax on super-rich and due to this certain FPI category registered as non-corporate entities was also needed to pay a higher tax.
And it is on this account that market has fallen since the Budget day due to heavy FPI outflow from the Indian markets, and wiped nearly Rs. 12.98 lakh crore investors' wealth. The market cap of BSE stocks during the period declined from Rs 151.35 lakh crore on the Budget Day, July 5, to Rs 138.37 lakh crore on August 5.
In a volatile trade today, there was a point when nearly 500 stocks hit 52-week low, which is rarely seen. But towards the end all of the indices ended with gains. Sensex ended the day with gains by 636 points while Nifty also ended above 11,000.
It is to be noted thatthe ministry in discussion with the PMO has decided to retain higher surcharge on super-rich category in India.
Now with the clarity on the FPI tax structure, the markets will be provided a much-needed direction.
Additionally, there have been reports that government is likely considering some other booster measures for the capital market segment such as rejig in respect of LTCG such as studying the implication of withdrawal of LTCG tax on equity after 3 year holding period and rejig in respect of tax rate on dividends.