Will market recoup after clarification on capital gains tax?

The reported rumours about the alterations to the capital gains tax structure has impacted  the stock markets badly on Friday.The ‘capital gains’ rumour mill worked over-time 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.

Union Finance Minister Nirmala Sitharaman has denied recent reports suggesting that the Income Tax (I-T) Department is considering alterations to the capital gains tax structure if the current government secures re-election in the ongoing Lok Sabha 2024 polls. The clarification comes amidst swirling speculation and concerns within the investment community regarding potential changes in taxation policies post-election.
Ambareesh Baliga, an independent market analyst believes the markets want ‘more of the same’ in terms of income tax-related policies. “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.Meanwhile,the broader market indices also came under pressure after hitting fresh highs in the early part of the session.The BSE midcap index fell 0.2 percent and smallcap index down 0.5 percent.
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.

(Ira Singh, Asstt Editor, Gandhinagar)