India Bank Stocks Seen Top Beneficiaries of Corporate Tax Cut
Most of the bank stocks are in the higher tax bracket and will see improvement in earnings: Deven Choksey
(Bloomberg) -- India’s bank stocks will be the biggest beneficiaries of Prime Minster Narendra Modi’s move to slash the corporate tax rate to among the lowest in Asia, according to K.R. Choksey Shares and Securities Pvt.
“Most of the bank stocks are in the higher tax bracket and will see improvement in earnings” said Deven Choksey, managing director at the company in Mumbai. Lenders including HDFC Bank Ltd., ICICI Bank Ltd., Kotak Mahindra Bank Ltd. and Axis Bank Ltd. would benefit the most as they are paying more than 30% in taxes, he added.
Taxes on domestic companies will be slashed to 22% from 30%, Finance Minister Nirmala Sitharaman said Friday. The effective new rate will be 25.2% including all additional levies and is applicable only for companies.
The NSE Nifty Bank Index rose as much as its daily limit of 10%, the most in 11 years, while India’s benchmark Sensex Index climbed as much as 6.3%. Lenders comprise four of the top 10 firms ranked on effective tax rates for latest financial year, according to data compiled by Bloomberg.
| Company | Effective tax rate |
|---|---|
| Grasim Industries Ltd. | 47% |
| Tata Steel Ltd. | 42% |
| State Bank of India Ltd. | 41% |
| Oil & Natural Gas Corp. | 38% |
| Zee Entertainment Ltd. | 36% |
| Coal India Ltd. | 36% |
| Bajaj Finance Ltd. | 35% |
| Britannia Industries Ltd. | 35% |
| HDFC Bank Ltd. | 35% |
| Bajaj Finserv Ltd. | 34% |
| Source: Bloomberg |
To contact the reporter on this story: Abhishek Vishnoi in Singapore at avishnoi4@bloomberg.net
To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Margo Towie
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