FM Income Tax Clarification May Help Markets Recover On Monday
Market experts anticipate this pullback to be supported by clarifications from the Finance Minister and positive US employment data, among other factors.
Indian stock indices are poised for a potential rebound on Monday following a significant sell-off on Friday that saw a sharp decline in benchmark indices the S&P BSE Sensex and the Nifty 50. Market experts anticipate this pullback to be supported by clarifications from the Finance Minister and positive US employment data, among other factors.
Trigger for Friday's Market Sell-Off
The intense market sell-off on Friday was triggered by speculative reports suggesting impending income tax changes post-elections, causing the Sensex to plummet by 1,100 points. Finance Minister Nirmala Sitharaman swiftly addressed these concerns and dismissed the "speculative" report.
Responding on social media, Sitharaman expressed disbelief, stating, "Wonder where this came from. Was not even double-checked with @FinMinIndia. Pure speculation." The current tax structure in India involves varying treatments for different financial assets, highlighting the market's sensitivity to potential policy shifts during the election season.
According to Deepak Jasani, retail research head at HDFC Securities, "The sell-off was triggered by reports on tax reforms and a cooling down of expectations regarding the extent of NDA's majority ahead of the third phase of elections."
Factors Driving the Expected Pullback
Market experts anticipate a positive momentum driven by the Finance Minister's clarification and the performance of US markets, which closed higher on Friday following the release of US employment data.
"The pullback on Monday will likely be influenced by the rise in US markets post their jobs data released on Friday afternoon," explained Jasani.
On Friday, major US indices rallied after the release of softer-than-expected jobs data, with the US economy adding 175,000 jobs in April and the unemployment rate rising to 3.9%. This data revived hopes of the Federal Reserve cutting interest rates later this year.
Siddhartha Khemka, Head of Retail Research at Motilal Oswal Financial Services, remarked, "We expect the market to consolidate within a broader range and gradually shift higher, reacting to US employment data and Q4 results."
Despite Friday's downturn, benchmarks had extended gains for the second consecutive week, with the NSE Nifty 50 closing 0.25% higher and the S&P BSE Sensex up by 0.20% in the week ended May 3.
Rajesh Palviya, Technical Research Head at Axis Securities, observed, "The market is likely to show a pullback as it holds above the 20-day moving average, indicating a bullish trend for the near-to-short term."
He added, "Nifty's ability to surpass the 22,650 level could lead to a new all-time high, given its current support around 22,200-22,300."
