Nirmala Sitharaman press conference highlights: Corporate tax relief to help stabilise economy, says Tech Mahindra's Gurnani

Puneet Dalmia, Managing Director, Dalmia Bharat Group:

Today’s reduction in corporate tax sends a powerful signal that the Government is absolutely determined to revive the economy. It also demonstrates government’s sensitivity and its faith in the corporate sector to contribute to the economic revival. This will improve the ability of India Inc to make fresh investments, speed up projects, and make a positive impact on job creation. It’s a very bold move and will improve the sentiment dramatically.

Jonathan Schiessl, Senior Vice President, IIFL India Equity Opportunities Fund told CNBC-TV18:

The cut in corporate tax to 25 percent from 30 percent (with exemptions) and removal of additional surcharge on capital gains made by FII and domestic investors etc are certainly positive news. Tax regime which has been confusing for overseas investors for some time has been addressed by Finance Minister Nirmala Sitharaman, he said, adding the sentiments have been very poor and this move certainly draw attention back towards Indian market.

Abheek Barua, Chief Economist, HDFC Bank:

The recent tax move is likely to provide a boost to the economy. We are revising our GDP growth forecast to 6.5 percent from 6.3 percent for 2019-20. The corporate tax cut is likely to not only attract greater foreign investments but could also support some revival in the capex cycle (driven by greater corporate savings). Our analysis show that a 10 percentreduction in corporate tax rate can result in 0.20bps to 0.50 bps increase in GDP growth (based on the tax multiplier for India, RBI Working Paper, 2013).

Jatin Dalal, Chief Financial Officer, Wipro Limited:

The government has taken a giant leap in tax reforms. It's a huge boost to corporates and will enhance India's position as a competitive destination for fresh foreign investments. ‘Make in India’ now gets a fresh impetus with reduced rates of corporate income tax. MAT rate reduction is also a bold move. Clarification on grandfathering of buyback tax on inflight buyback programs as of July 5,2019 is a comforting outcome. This would go a long way in restoring confidence in the market and nudge companies to make fresh investments.

Shibani Kurian, Senior Vice President and Head of Equity Research, Kotak Mahindra AMC:

This is a huge step in boosting the overall profitability of corporate India. This step along with some of the other measures announced including that the enhanced tax surcharge introduced in July 2019 shall not apply to Capital Gains on sale of equity share which is subject to STT (Securities Transactions Tax) would go a big way in restoring confidence in the Indian equity markets. One the biggest problems ailing the investment rate was low corporate savings and, to the extent, this tax cut boosts corporate savings, this is positive structurally for the improvement in private sector investment rate.

The announcement by Finance Minister Nirmala Sitharaman to reduce corporate tax will have a 'big sentimental impact', and also gives companies the flexibility of choosing between tax structures, said JSW Steel's Seshagiri Rao.
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"For achieving the dream of becoming a $5 trillion economy (by 2025), such a decision is important. I am sure the market will react positively to the move. We have already seen the share markets rallying," Union Minister Nitin Gadkari saidon the corporate tax rate cut announcement.

The stock markets responded positively to the relief measures announced today , with benchmark indices closing with biggest single-day gain in the last 10 years. Investors got richer by Rs 6,82,938.6 crore after the Sensex added 1,921 points and the Nifty gained 569 points.

Click here for details onall that transpired in the market today.

Rajiv Mehta, Lead Analyst, Yes Securities:

The direct benefit of the massive tax cut would be around 15 percenton earnings, 2.5 percent to 5 percenton book value and 30 bps to 80bps on capital position for most banks and NBFCs. It is tantamount to a large recapitalization of the financial system, strengthening growth capacity and loss-absorbing buffer. Since it’s a big step towards rekindling the corporate capex cycle and revitalizing sagging consumption, it would also be credit positive for Banks and NBFCs; undermining prospects of a deep and elongated NPL cycle. In general, risk aversion in the economy could reduce as the multiplier and sentimental impact of the corporate tax cuts play out. Our Top Picks are HDFC Bank, ICICI Bank and SBI.

Aditi Nayar, Principal economist, ICRA Ltd:

We expect today's announcement to provide a big boost to business sentiment in the immediate term, with a modest knock on impact on consumption demand, particularly for big ticket items. However, the impact on fresh investment activity may be visible with a lag. Today's announcement would complement the expected further Repo rate cut in the October 2019 policy review. We continue to expect a 25 bps rate cut in the upcoming MPC review.

Taxsutra to CNBC-TV18:

Government uses ordinance to amend taxation laws to effect announcements. The ordinance provides for a reduced rate of tax of 22 percent and 15 percent for certain domestic companies. The ordinance to amend taxation laws is effective immediately. It lowers tax rate to 22 percent (plus surcharge and cess) for certain domestic companies and to 15 percent (plus surcharge and cess) for domestic manufacturing companies.

Fiscal stimulus, with one stroke, changes the narrative for India as an investment hotspot

So far, easier monetary policy alone was expected to do the heavy lifting, but by cutting the corporate tax rate from 30 percent to 22 percent, a fiscal stimulus is added. It brings India at par with some of the major Asian countries and these steps can help India capitalise on the opportunities from the trade war. can also re-energise private capex cycle and Make in India initiative.
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Bulls may take Nifty to 12,000 by Dec after surgical strike on bears

Union Minister Ravi Shankar Prasad asks electronics manufacturers to take full advantage of tax incentives

Amit Sharma, Managing Director of Miraj Cinemas called it a "superb reform", adding, "It will give incentive to domestic companies to invest more on stalled Capex and expansion."

S Ranganathan, Head of Research, LKP Securities said: "The FM delivers the right recipe to cheer corporate India. The bulls are back and the sheer velocity of the rally signifies the extent of pessimism that has been prevailing in our markets."

Mustafa Nadeem, CEO, Epic Research feels, reducing the corporate tax rate is a big boost for the market.
"This is huge for the market. There were few announcements that were keeping sentiments in check as FM was trying to boost market sentiments and improve the state of the economy by boosting exports, banks consolidation, re-capitalisation and so on but reducing the corporate tax rate is a big boost," Nadeem said.

Tax reduction means better capital efficiency for the engineering sector

VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services said the measures announced by the finance minister can be described as a 'New Deal' for the Indian economy. "The psychological stimulus from this 'New Deal' will be higher than the fiscal stimulus. Animal spirits will respond positively. The message from Dalal street is a clear signal. Bold move indeed," he added.

Stay with Moneycontrol for LIVE updates on the GST Councilpress conference LIVE

CEO of PMS Prabhudas Lilladher Ajay Bodke, called it a major boost to revive flagging animal spirits and position India as one of the most attractive business destinations.
"Government of India has announced a slew of measures that would act as a force multiplier for the flagging economic engine. The government has rolled out a red carpet that would ensure hundreds of billions of dollars of FDI & FII flows over the medium term by slashing corporate tax rate to 25 percent from 35 percent (22 percent from 30 percent without exemptions) for existing domestic companies; and an extremely attractive rate of 15 percent for new companies setting up manufacturing operations after October 01, 2019 and commencing operations before 2023," he added.
He echoed other sentiments likening the move to an early arrival of festival of lights (Diwali) and banishment of long period of darkness and gloom bothering the Indian economy.

Rahul Gupta, Currency Research Head, Emkay Global Financial Services said, "the news of government lowering corporate tax has rejoiced the market, stocks rallied sharply with bank nifty posting its biggest single-day gain in 10 years. This gave rupee a big boost and $/Rs spot dropped to 70.67. The move was imperative as we are in a low demand cycle amid global idiosyncrasies."
He added that the RBI has been providing support to the economy by reducing interest rates since 2019 however economy needed some boost from the fiscal front as well.But pointed out that the bond market did not take the fiscal announcement very well and the finance minister was unable to justify the fiscal concerns. "Thus the 10-year yield surged nearly 25 bps keeping rupee gains under check. Unless the $/Rs spot doesn’t end below 70.80, we expect prices to bounce 71.50 in next week," he added.

Ajit Mishra, Vice President Research at Religare Broking said, "the finance minister has finally taken strong measures to kick start the economy. The corporate earnings had worsened in the last few quarters mainly due to the ongoing slowdown. The cut in corporate tax rate would mean more income for corporates. This would have a direct positive impact on the EPS on all domestic companies."
Mishra added that this move along with the easing of enhanced surcharge has the potential to revive FII sentiments as well, as the corporate tax rate makes Indian companies more competitive in the global markets.

Deepak Jasani, Head of Retail Research at HDFC securities said, "the markets have expectedly reacted very well to the relief measures announced today. The government has chosen to spur consumption and investment by giving reliefs in direct taxes (vs GST reliefs expected by different sectors)."
The loss in terms of tax revenues would take time to be offset by the higher tax revenues gained on consumption (out of higher dividends/buybacks announced by corporates due to Corporate tax savings) or investments in new facilities by corporates out of their savings. In the meanwhile, the fiscal situation could see some pressure. This could impact the interest rates unless the compensating liquidity from FPIs and FDI is large enough, Jasani explained.
He added that reaction of FPIs to these impacts will be keenly observed. The markets could give some time for the above impact to trickle down before going back to cautious stance.
"Stressed corporates may however not benefit as the reliefs may not apply to them, as no GST reliefs have been announced. Large change in PSU divestment policy and changes in land, labour and judicial reforms may be more keenly awaited now than ever before. Kharif harvest outcome (and its impact on rural income and spend) and festive season consumption spend in urban areas in mid to end October will also be looked forward to," he noted.

Welcoming the corporate tax cut for the sector in general, Head of Research at CapitalAim Romesh Tiwari said it would help boost the investment activities in the manufacturing cycle.
"The immediate impact on the market is due to unexpected cuts on tax rates and a surcharge that has also triggered heavy short covering and long build-up. Short term trend is changed to bullish and we may see Nifty crossing 11,700 soon lead by Auto, Capital Goods, Realty and Infrastructure companies," he said.

On the market situation post measures announced today, Shrikant S Chouhan, Senior Vice-President, Equity Technical Research at Kotak Securities said, "We earlier mentioned in our report that the market is entering into extreme pessimism and such market gives golden opportunity to invest. The market did exactly as per our expectation where it maintained its previous low of 10,637, forming a higher bottom today and reversed all losses."
"Market has turned upward for a longer time and is a classic bottoming out formation on all time frames and we would see the levels of 11,600. Buying is advisable at current levels and more on declines at around 11,100/11,000 which would be a major support area," he said.

State Bank of India Chairman Rajnish Kumar called the corporate taxes across companies the "boldest reform in the last 28 years".
"Such a rate cut will boost the corporates'bottom line, facilitate a reduction in product prices. Additionally, the move to incentivise setting up new manufacturing units in India comes at the most opportune time for foreign companies who could be actively looking for opportunities to invest globally," Kumar said.
He also echoed Prime Minister Modi's view that these measures could "lead to India effectively integrating with the global supply chain and give a boost to Make in India campaign."

Commenting on announcements made by the Finance Minister today, Ashishkumar Chauhan, MD & CEO of the BSE said the "slew of historic measures" has brought down Indian corporate tax rates to amongthe lowest in the world especially for the new manufacturing companies.
"These decisions will be celebrated as historic and will go a long way in improving ‘Ease of Doing Business In India’ even further. We, at BSE, welcome these moves and thank the Prime Minister and Finance Minister for promoting Indian industries. There are several other fiscal measures that have also been announced which all point to the government’s commitment to promote the business activities and enhance job creation manifold. These announcements will further boost the investor confidence and start the investment cycle,” Chauhan said.
He added that the removal of surcharge for domestic investors in line with the FPIswill also go a long way in bringing much needed fresh investment and animal spirit in the India capital markets.

Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote termed the move a "surgical strike on bears and negative sentiments in the economy".

"This will create an environment of surplus in the hands of corporates for making further investments and ease their liquidity concerns. Companies in consumer finance, private and public sector banks and hotels all pay upwards of 32 percent tax will have maximum benefits, however, rest of the sectors will have a nominal positive impact. This move delivered by Modi 2.0 government in the interest of economy at the cost government exchequer in times of crises which will go down well in the history," he added.

Shishir Baijal, Chairman & Managing Director of Knight Frank India said, "It is a milestone effort towards kick-starting the Indian economy and boost production. This substantial direct tax reduction will allow more liquidity for the corporates that are currently assuming drastic measures to protect their profitability."
He added that the reduction in corporate taxes will help organisations to grow and help boost employment restoring the balance in the economy, which will, therefore, lead to higher consumption leading to GDP growth. "As it is always the case, a high GDP growth leads to stronger end-user buying pattern and general financial confidence of making long-term commitments," Baijal pointed out.
"These measures will complement the monetary policy measures taken by the RBI in increasing liquidity and consumer spending. As a trickle-down effect of this, we should be hoping for a revival for the real estate sector as well. This boost will certainly accelerate demand for commercial spaces, but we understand that the financial stability expected will propel growth for the beleaguered residential market in the near future," he added.

Motilal Oswal, Chairman and Managing Director of Motilal Oswal Financial Services said the tax cut is positive for all companies. "We do believe that we need fiscal stimulus to get out of this slowdown and monetary policy alone could not do that. Hence this move is very good for the country and markets," he added.

Gopichand P Hinduja, Co-Chairman of the Hinduja Group called today's announcement "an excellent step" needed for the revival of the Indian economy and manufacturing sector.
"It shows the government is well seized of the economic challenges facing all of us. I only wish more such steps, which government is already contemplating, could be taken together in one go like tapping non-resident Indian (NRI) investments, with this one so as to create deeper impact, instil more confidence in the economy and amongcorporates. This would certainly help put businesses back on track, generate more employment and most importantly, keep India as the principal investment destination amidglobal slowdown," he added.

Hitesh D Gajaria, Partner and Co-head of Tax, KPMG in India said the 22 percent tax rate finally makes India tax competitive. Adding, "it is a hugely positive step that will conserve much-needed funds in the hands of corporates to turbocharge investments leading to more employment and capacity creation. Will also reduce litigation on contentious issues around incentives."
Terming the MAT reduction to 15 percent welcome, Gajaria added that the next follow-through step awaited would be moving the tax on dividends to shareholders and freeing companies from the dividend distribution tax burden.

Archit Gupta, Founder and CEO, ClearTax:

The govt has played well to respond to the slowdown. Several economies have shown that reduction in direct tax rates is positively correlated to increase in economic growth. While this also means there will be no indirect tax rate cuts. This is a welcome move and much needed boost to the economy. It also shows a switch in direction to a regime with overall lower tax rates (with minimal exemptions). Similar direction may as well be expected on direct taxes for individuals in the future.

Rajiv Singh, CEO, Karvy Stock Broking:

After a large number of minor measures, the government announced a bold and major measure to revive animal spirits. The high corporate tax rate meant that Indian companies were not competitive and this move helps address this and shall also boost FDI. The effective tax rate now stands at 25.17 percent, and for new companies the effective tax rate will be 17 percent. The measure is thus a boost for startups as well. Additionally, the finance minister also announced that there will be no tax on buybacks announced before July and no surcharge on capital gains as well. Reduction of corporate tax has been on the agenda for a while, and this should help in boosting the capex cycle, also it gives companies space to cut prices to boost demand. The corporate tax cut should go a long way in a revival of the economy.

RBI Governor, Shaktikanta Das said government's tax cut move today is 'bold & welcome'

Das said that the decision to cut taxes highly positive for the Indian economy. He added that they are not oblivious of fiscal impact because of today's steps and that there is a need to keep an eye out for financial stability. He added that there is some room for more reforms on land and labourand that the government must focus on quality of expenditure. Das said that he expects July-September GDP to be better due to government spending and that the bigger role in economic growth lies with the government. He pointed out that the tax rate cut announced today takes India closer to Asian peers.

Titan CFO Subbu Subramaniam toldCNBC-TV18that today's moves could be "called Diwali" as cut in tax will directly impact earnings. "We will save fourpercentfrom rate cuts. With the effective tax rate 29 percent, the benefit will pass on to consumer." He added that demand will get a boost and large ticket consumption is significantly led by "mood of the economy".

A major bonanza and path-breaking reform for Corporate Tax Payers. By announcing a reduction in Corporate Tax to 22 percent for existing companies and 15 percent for New Manufacturing Companies the government has answered long-standing demand for corporates. This would encourage competitiveness and also minimise tax cash outflows which would be ploughed back into Economy. It is a great move aiming to bring back the economy into sound position, says KR Sekar, partner, Deloitte India

Rajat Rajgarhia, Managing Director & CEO at Motilal Oswal Financial Services tells CNBC-TV18 that most private banks would be immediate beneficiaries of the tax cuts announced day.

Reacting to the news, Nilesh Shah,Founder and Chief Executive Officer ofEnvision Capital Services told CNBC-TV 18that the moves announced by the government are "extremely positive" and will increase efficiency. He also expects today's announcement to boost earnings hereon.

Finance Minister Nirmala Sitharaman's corporate tax cut can be seen as an early Diwali gift for India Inc. as tax slashed to 25.17 percentfor domestic companies. This is a reduction from 30 percent.

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