The Telegraph
Since 1st March, 1999
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Tax waiver hopes trigger stock rebound

Mumbai, Feb. 27: Markets were on their toes this budget-eve, holding their breath for Jaswant Singh to unwrap a budget that yanks the economy out of the funk.

Operators expect investor-friendly proposals, like the end of taxes on dividends and long-term capital gains. Mirroring the peaking anticipation, the Bombay Stock Exchange (BSE) sensex shrugged off war jitters to close with a 17-point gain, ending a losing streak in which it gave up close to 2 per cent over the past two sessions.

Brokers said the Economic Survey presented in Parliament today brought a feel-good sentiment, raising hopes the government would press ahead with the job of fixing the economy and rejuvenating industry.

The Survey cited revenue deficit as the main cause of fiscal imbalance, saying the government must slash subsidies and save on salary bills if it wants to rein in expenses. It also pointed to the need for bringing the rate of interest on small savings in line with the market. The sense that these rates will be brought down by half a per cent led to brisk buying in bank stocks.

The 30-share index opened at 3283.29 and plumbed the day’s low at 3251.40 before closing at 3277.34, a gain of 0.52 per cent over Wednesday’s finish at 3260.48 points.

“The markets are betting the finance minister will remove taxes on dividends. Further, the current capital gains tax is 10 per cent and if that is cut, it would mean more inflows into mutual funds. Therefore, any positive action by Singh on these fronts will only come as a boost to investor sentiment,” a broker said.

Many also expect the budget to scrap the 5 per cent national security surcharge on corporate tax introduced last year, a move that will shore up bottomlines.

Also high on the list of the market’s wish-list is a hike in the cap on FII investments in nationalised banks to 49 per cent from the current 20 per cent. The hope came through in the way bank shares nudged higher.

Foreign institutional investors (FIIs), which were net sellers to the tune of Rs 100 crore in the first two sessions of this week, bought heavily in technology shares. Brokers said added buying in software scrips will intensify if the finance minister does not impose fresh taxes.

Key stocks like Bhel, RIL, SBI, HLL, HPCL, Grasim and Tisco bounced back from intra-day lows and finished with sharp gains on strong purchases by domestic funds.

The volume of business was Rs 1182.75 crore, up from Rs 1162.15 crore on Wednesday. Digital Global Soft clocked the highest turnover of Rs 184.24 crore, followed by Mastek (Rs 130.37 crore), Infosys (Rs 107.25 crore), Satyam Computers (Rs 102.85 crore) and SBI (Rs 52.22 crore).

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