{"id":99398,"date":"2025-02-20T12:28:08","date_gmt":"2025-02-20T12:28:08","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/investing\/boomas-fm-busts-corporate-taxwowhownow\/"},"modified":"2025-02-20T12:28:08","modified_gmt":"2025-02-20T12:28:08","slug":"boomas-fm-busts-corporate-taxwowhownow","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=99398","title":{"rendered":"Boom!as FM Busts Corporate Tax!~Wow!How!Now!?"},"content":{"rendered":"


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Released today under my authorship in the SCRIP STANDPOINT Module of Jeena Scriptech Alpha Advisors Pvt Ltd<\/span>\u00a0\u00a0<\/strong><\/em><\/p>\n

\u201cHow\u2019s the Josh !?\u201d<\/strong><\/p>\n

Boom!as FM Busts Corporate Tax!~Wow!How!Now!?<\/strong><\/p>\n

The effect of Fun & Excitement peaks when the cause is least expected<\/strong><\/p>\n

Market Sentiment has reversed dramatically & instantaneously !\u00a0\u00a0<\/strong><\/p>\n

BSE & NSE\u00a0 has seen the Sensex & Nifty created historic surges<\/strong> moving respectively 5.32% & 1921 points up to 38015 & 569 points to 11274 on Friday,September 20,2019 & even more by 2.83% to 39090 & 11600<\/strong> on Monday ,September 23,2019 to aggregate a surge of 8.3% in just two trading days with Total Market Capitalisation zooming up in just these two trading days by Rs 10,45,700 crs or nearly US $ 150 Billion\u00a0 to\u00a0 Rs 148,87,830 crs or near US $ 2.1 Trillion ,thus regaining US $ 2 Trillion Capitalisation quickly !\u00a0<\/strong><\/span><\/p>\n\n\n\n\n\n\n\n
Date<\/td>\nSensex Close<\/td>\nUp\/(Down)\u00a0 Points, %<\/td>\nApprox Total Market Cap<\/p>\n

(Rs Crs)<\/p>\n<\/td>\n

Total Market Cap Up (Down )<\/p>\n

Rs Crs, %<\/p>\n<\/td>\n<\/tr>\n

Friday ,September 13,2019<\/p>\n

A Week Before<\/p>\n<\/td>\n

37385<\/td>\n\u2013<\/td>\n1,42,42,950<\/td>\n\u2013<\/td>\n<\/tr>\n
Thursday,September 19,2019<\/p>\n

Day before Tax Rate\u00a0 Game Changing Significant Slash Announcement<\/p>\n

\u00a0<\/p>\n<\/td>\n

36093<\/td>\n(1292), \u2013 3.46<\/td>\n1,38,42,130<\/td>\n(4,00,820),\u00a0 -2.8<\/td>\n<\/tr>\n
Friday,September 20,2019<\/span><\/p>\n

Morning of\u00a0 FM\u2019s Tax Rate\u00a0 Game Changing Significant Slash Announcement<\/span><\/strong><\/p>\n<\/td>\n

38015<\/span><\/td>\n1922, 5.32 %<\/span><\/strong><\/td>\n1,45,34,237<\/span><\/td>\n6,92,107,\u00a0 \u00a05<\/span><\/td>\n<\/tr>\n
Monday,September 23,2019<\/span><\/p>\n

On Second Trading Day after\u00a0 FM\u2019s Tax Rate\u00a0 Game Changing Significant Slash Announcement<\/span><\/strong><\/p>\n<\/td>\n

39090<\/span><\/td>\n1075, 2.83 %<\/span><\/p>\n

&<\/span><\/p>\n

2997 in two days, 8.3%<\/span><\/strong><\/p>\n<\/td>\n

1,48,87,830<\/span><\/td>\n3,53,593,\u00a0 \u00a02.43<\/span><\/p>\n

&<\/span><\/p>\n

10,45,700,\u00a0 \u00a07.56\u00a0<\/span><\/strong><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Wow ! How !\u00a0 Now ! ?<\/strong><\/em><\/span><\/p>\n

It took a Government Sacrifice of\u00a0 Rs 1,45,000 crs or US $ 20 Billion in Corporate Tax Revenues to create a 7x sacrifice surge in Market Cap of US $ 150 Billion in just two trading days !<\/strong><\/span><\/p>\n

It\u2019s like the Government conceding to the Corporate Sector <\/span>\u201d Hey Guys ! we\u2019re transferring our Revenues to you as you\u2019ll can put it to more productive use by funding an Investment Capex Cycle to stimulate more growth for better returns than we can through increased Government Spending \u201c<\/span><\/strong><\/span><\/p>\n

What is clearly a Market Valuation Re-Rating Move<\/strong>,on the morning of Friday,September 19,2019 our FM Mrs Nirmala Sitharaman announced,what should be seen as a forced measure, a Tax Bonanza for Corporates busting the Tax Rate from an effective high of 34.94% for most to an effective 25.168% with no requirement for those who opt for this rate,\u00a0 to pay the Minimum Alternate Tax which too was slashed to an effective 17% from\u00a0 the current 18.5%.Another major tax incentive will be a Tax rate of just 15% for manufacturing companies incorporated after October 1,2019\u00a0 & who commence manufacturing by March end 2023<\/span><\/strong><\/p>\n

Such Tax Rate Cuts & Incentives\u00a0 announcements should have been part of the budget in early July.If one recalls since the NDA came to power in 2014,it\u2019s always been their stated intent to reduce the Corporate Tax Rates gradually to 25%.Economic slowdown is a catalyst to this \u2018one shot\u2019 reduction now & that\u2019s why it can be viewed as a forced measure<\/strong><\/p>\n

It\u2019s a \u2018No Brainer\u2019 that Markets would instantly turn euphoric as back of envelopes calculations see the Nifty 50 Companies,whose aggregate FY 19 PAT was Rs 370000 crs , benefit by a clean Rs 27000 crs or US $ 3.8 billion in FY 20 on this Tax Rate reduction.Factor in Earnings Growth before Tax & the benefit is even higher\u00a0<\/strong><\/p>\n

FPIs who had relentlessly sold US $ 4.5 Billion Equity post budget from early July 2019\u00a0 have once again began stocking up past two trading days<\/strong><\/p>\n

The \u2018Brainer\u2019 is whether such a move will stimulate growth by motivating Corporates to invest the tax savings in capex & an investment cycle which will create a Tax Buoyancy that will compensate year after year for the Rs 145000 crs tax revenue sacrifice the government states it shall incur this year.<\/span><\/strong><\/p>\n

Rajiv Kumar of NITI Aayog has opined that the Government will make up this loss of Tax Revenues through higher Non Tax Revenues.We\u2019ll examine these too a little later below\u00a0\u00a0<\/span><\/strong><\/p>\n

But First can this \u2018Josh\u2019 sustain into 2020 & beyond ?<\/strong><\/em><\/span><\/p>\n

Sense is Yes ~ <\/strong>Sensex & Nifty should reclaim 40000 & 12000 sooner than later. We\u2019re not to far away from all time Sensex intraday High of\u00a0 40312 recorded a few months ago on June 4,2019 ~ Markets are being re-rated on Valuations & Perspectives are shifting again favorably on Potential & Prospects going ahead<\/strong>.Leading FPIs & Players,after having downgraded just last month in August 2019, have once again upgraded their Sensex & Nifty Targets for December 2019 & March & June 2020 which of course are not to high from all time highs already recorded<\/strong> ~ This would be sensible ,given the unbridled optimism they all essayed at the beginning of this year of high Earnings growth in FY 20 ~ This would also sound some caution in the short term on current Indices Levels after this two days surge\u00a0<\/strong><\/span><\/p>\n

Banking & FMCG Sectors are the major beneficiaries as they were paying Taxes at effective rates higher than 30% while export oriented sectors of Pharmaceuticals & Information Technology will not get any benefit ~ Markets have rewarded & penalised accordingly in the past two trading days<\/p>\n

So NOW ? will this much brandished target of a US $ Five Trillion GDP by 2024\/25 become a reality or will we have to await a year or two beyond this?<\/p>\n

It\u2019s being set up to achieve :<\/p>\n