PAUSE. Recognize the importance of yellow traffic light. Traders who are on long side, pause a bit. Traders who are on short side, pause a bit. Friday's announcements have thrown all old valuations of stocks out of window and all the stocks will have to be rerated by fundamental experts. Thankfully, weekend must have given all the experts, analysts enough time to analyse, revalue and arrive at some correct estimate of any particular stock and indices in general. So for first few hours take a backseat and observe movements. I certainly will not trade.
Now people may argue that friday's announcements came quite early in the morning and rest of the day experts had enough time. I don't think so. Because FIIs will have to go back to drawing boards and redraw their strategies in consultation with their managements since now there is a case for bulls as well as for bears. For Bulls measures like, heavy corporate tax rate cut, for new manufacturing firms (effective) tax rate of around 17%, reduction in MAT from 18.5% to 15%, no tax on Buyback of shares (after 5th July),no surcharge on capital gains arising out of sale of securities/derivatives- are all super encouraging indicators. And that made Nifty run up by 569 points! But for bears, the govt. shortfall of 1.45 lakh crs due to these measures, its dent in fiscal deficit, how these will help in reviving demand since bigger problem is demand slowdown will also bear on their minds. Also in friday's euphoria, companies which were already paying taxes at effective rate less than 25% ran up, so those will tomorrow get corrected a bit. According to a report in TOI, out of 30 sensex companies, if we leave 9 finance companies (read banks/ NBFCs) out due to their different calculations, out of remaining 21 companies only 10 were above effective tax rate of 25 %. Rest 11% paid effective tax at less than 25% in last FY (2018-19). Banks (especially a lot of private banks which have good weightage in BNF)were paying taxes above 34% so BNF may still look stronger.So all these adjustments will happen.
Therefore watch and observe for first few hours and only then take fresh positions.
All the best. Happy trading.
Now people may argue that friday's announcements came quite early in the morning and rest of the day experts had enough time. I don't think so. Because FIIs will have to go back to drawing boards and redraw their strategies in consultation with their managements since now there is a case for bulls as well as for bears. For Bulls measures like, heavy corporate tax rate cut, for new manufacturing firms (effective) tax rate of around 17%, reduction in MAT from 18.5% to 15%, no tax on Buyback of shares (after 5th July),no surcharge on capital gains arising out of sale of securities/derivatives- are all super encouraging indicators. And that made Nifty run up by 569 points! But for bears, the govt. shortfall of 1.45 lakh crs due to these measures, its dent in fiscal deficit, how these will help in reviving demand since bigger problem is demand slowdown will also bear on their minds. Also in friday's euphoria, companies which were already paying taxes at effective rate less than 25% ran up, so those will tomorrow get corrected a bit. According to a report in TOI, out of 30 sensex companies, if we leave 9 finance companies (read banks/ NBFCs) out due to their different calculations, out of remaining 21 companies only 10 were above effective tax rate of 25 %. Rest 11% paid effective tax at less than 25% in last FY (2018-19). Banks (especially a lot of private banks which have good weightage in BNF)were paying taxes above 34% so BNF may still look stronger.So all these adjustments will happen.
Therefore watch and observe for first few hours and only then take fresh positions.
All the best. Happy trading.