Indian markets gave a thumbs up to the roll-out of Goods and Services Tax on July 1. Sensex soared over over 300 points, making the biggest single-day surge in a month, and Nifty too rose by 94 points to close at 9,615.
The across-the-board buying helped the BSE flagship index close at a fresh one-week high of 31,221.62.
The overall business sentiment was buoyed by expectations that the implementation of the Goods and Services Tax (GST) will provide the much needed stimulant to the country’s economic growth by transforming the earlier multi-pronged indirect taxation into a ‘one nation one tax’ system.
Instilling optimism among investors, Moody’s said the GST implementation will be positive for India’s rating as it will lead to higher GDP growth and increased tax revenue.
Robust capital inflows from foreign institutional investors (FIIs) and positive global cues further supported the momentum.
Shares of the fast moving consumer goods (FMCG) firms led the rally, followed by telecom, metal, realty and auto counters.
“Market welcomed the new tax regime with a positive note while shrugging off the initial hiccups of investors during the last couple of weeks where market witnessed consolidation. Spending is likely to increase due to the impact of lower tax and increased sales volume will continue to benefit the earnings potential in the future,” Vinod Nair, Head of Research, Geojit Financial Services Ltd, said.
Cigarette maker ITC was the top gainer in Sensex, rising 5.70 per cent to end at a 52-week high. This is mostly because taxation for cigarettes under the GST is around 5-6 per cent lower than the previous tax structure.
The biggest tax reform since independence, the GST, was launched by Prime Minister Narendra Modi at a special midnight event in the Parliament on June 30.
(With inputs from PTI)