The broader markets fell more than frontliners as the Nifty Midcap index lost 13 percent and Smallcap index shed nearly 18 percent.
After touching new all-time highs on hopes of policy continuity, the Indian benchmark indices have been weak since the re-election of the NDA government. The Sensex is down 7.1 percent, while Nifty50 fell 8 percent since May 23.
The market has exhibited nervousness on a slew of local and global factors such as economic weakness and the US-China trade war, among others.
To counter the economic slowdown and to revive market sentiment, FM Nirmala Sitharaman has announced a series of steps over the past few months.
The Finance Minister Nirmala Sitharaman announced the rollback of additional surcharge on long-term and short-term gains made by foreign and domestic investors, which was a big relief as it was one of the reasons that dented sentiment at FII desk.
The budget proposed an increase in tax surcharge to 25 percent from 15 percent for individuals earning between Rs 2 crore to Rs 5 crore, while for individuals earning more than Rs 5 crore, it increased to 37 percent from 15 percent. With the latest move by the central government, the effective tax rate increases to 39 percent for the rich and 42.7 percent for the super-rich.
The signs of economic slowdown has clearly been reflecting in the auto sector as the Nifty Auto index fell nearly 14 percent in first 100 days of Modi government 2.0 and more than 33 percent in last one year.
Liquidity crisis, weak demand, BS-VI transition, higher purchasing cost, push for electric vehicles, US-China trade war, ban on diesel cars in Europe etc. were the major factors that hit the auto sector.Now the auto industry is hopeful for a recovery in the upcoming festive season, especially after the government came up with certain relaxations and promises to help revive the sector from an unprecedented slowdown.
The government deferred hike in one time registration fees till June 2020, increased the depreciation rate from 15 percent to 30 percent for vehicles purchased up to March 2020 and announced relaxation in earlier stringent deadline of converting the ICVs to electric vehicles by 2023.
To boost demand, the government will also lift the ban on purchase of new vehicles for replacing all old vehicles by Departments. BS IV vehicles can be purchased till 31st March 2020 and to remain operational for the entire period of registration.
PSU Banks Merger
On August 30, Sitharaman announced the mega merger of public sector banks, merging 12 banks into ten. Sitharaman also announced upfront recapitalisation money of Rs 55,250 crore (of total Rs 70,000 crore declared in Budget FY20) for state-owned banks.
Oriental Bank of Commerce and United Bank of India would be merged into Punjab National Bank, while Canara Bank and Syndicate Bank would be merged.
Union Bank of India will be merged with Andhra Bank and Corporation Bank while Indian Bank will be merged with Allahabad Bank.
The Monetary Policy Committee cut its benchmark repo rate by 35bps at its August policy meeting, bringing it to a nine-year low at 5.4 percent.
However, in the face of slow transmission, the government followed up with an announcement that banks would now link lending rates to the benchmark rate instead of the MCLR.
This resulted in several banks cutting rates since.
Changes in STT on Option contracts
With effect from September 1, 2019, in case of Option contracts, STT (Securities Transaction Tax) at the prescribed rate levied on the 'intrinsic value' instead of the settlement price as at present. The intrinsic value has been defined as the difference between the settlement price and the strike price of the option.
As of now, STT is charged on the entire value for 'In the Money' strikes on the buying side, at 0.125 percent. For instance, a Nifty Call Option with a strike price of 11,000 expires In the Money at a spot price of 11,100. It would have cost around Rs 1,040.62 per lot (11,100 x 75 x 0.125 percent) in the current situation. But with the changes, the same would attract an STT of just Rs 9.375 per lot (11,100-11,000)*75*0.125 percent).
This surely will help option traders as their effective transaction cost reduces and in turn this will help in getting higher liquidity in the options market, experts feel.
To improve ease of doing business and ease of living, the government announced long term measures including GST refund in 30 days to MSME and randomized- faceless - e-assessments for IT."Speeding up GST refunds and streamlining the MSME Act are welcome steps and should give some impetus to the MSME sector. Faster tax refunds have been a long-standing request from the sector, and we are glad the government is acting on it," Pushkar Mukewar, Co-Founder and Co-CEO of Drip Capital, a US & India based trade finance firm said on August 23.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.