Markets rally on fiscal roadmap, tax proposals

The Sensex is now quoting at 16532, higher by 278 points and the Nifty is at 4952, up 92 points.

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(Updated at 1340pm)

The markets have rallied further as the fiscal roadmap and the change in the personal income tax slabs went down well with the markets. The Sensex is quoting at 16582, higher by 329 points and the Nifty is at 4966, up 107 points.

The minister is aiming to bring down the fiscal deficit, which is the difference between total expenditure and revenue as a percentage of the GDP, from 6.9 per cent in the revised estimates for the current fiscal. He has pegged the FY12 fiscal deficit at 4.8% of GDP and the FY11 fiscal deficit at 5.5%. And the market borrowings for the next fiscal have been pegged at Rs 3,45,000 crore.

On the personal income tax front, there will be no income tax on personal income up to Rs 1.60 lakh per annum, while Rs 1.6-5 lakh would attract a tax of 10 percent and income between Rs 5 lakh and Rs 8 lakh would involve a tax of 20 percent. Income in excess of Rs 8 lakh would be taxed at the rate of 30 per cent.

Implementation of the direct tax code has been deferred by a year and surcharge is reduced from 10% to 7.5%.

Banking stocks such as SBI (stronger by 4.5% at Rs 2,002), ICICI Bank (higher by 3% at Rs 878) and HDFC Bank (up 2% at Rs 1,721)  were the major gainers in the banking space. 

The government increased the excise duties on all non-oil products by 2 per cent to 10 per cent and on petrol and diesel by Rs 1 a litre. Reliance Industries has strengthened by 2.2% at Rs 986 and Cairn India has added 1.7% at Rs 262.

The excise duties on MUVs, SUVs and large cars have been hiked from 8% to 10%, while small cars and two-wheelers have been left unchanged. No matter, Maruti has added 3.7% at Rs 1,453, Tata Motors has appreciated by 5.4% at Rs 7050 and Bajaj Auto has moved up 4.5% at Rs 1,793.

And fertilizer companies gained after the Finance Minister proposed to provide government subsidy for fertilizers in cash instead of bonds. Tata Chemicals (up 2.5% to Rs 288), GSFC (up 1.7% to Rs 167), Nagarjuna Fertilizers & Chemicals (up 0.9% to Rs 32) edged higher.