A man looks at a screen across the road displaying the Sensex on the facade of the Bombay Stock Exchange (BSE) building in Mumbai
After slipping over 500 points in intra-day deals after Finance Minister Arun Jaitley’s proposals to reintroduce General anti-avoidance rule (GAAR) from April 2017, allocating Rs 25,000 crore for recapitalisation of PSU banks that is much below Street’s estimates and proposal to levy 10% dividend distribution tax in the hands of investors, the S&P BSE Sensex recovered sharply.
By late noon deals, the benchmark index had erased most of its intra-day losses. The recovery in the markets, analysts say, was mostly on account of the government’s plan to stick to its fiscal deficit target of 3.5% of GDP.
“Fiscal deficit of 3.5% of GDP is very positive commitment. The bond yields are falling and it suggests that: (1) Interest rates will be pushed down. This will increase credit push and consumables will be pushed higher; (2) India's ratings could improve with commitment to fiscal discipline. This would eventually bring larger amount of FDI inflow in the country,” said Deven Choksey, MD and CEO, K R Choksey Shares and Securities.
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