Tax cut rally: Half of the ‘euphoric’ wealth gained in tax cut rally fizzled out in 7 days

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New Delhi: It took a Rs 1.45 lakh crore corporate tax cut bonanza to build a two-session ‘euphoria’ on Dalal Street, but the rally fizzled out quickly.

Data showed the domestic equity market gave up half the gains that it had amassed during the post tax cut rally in the correction seen through September 24-October 4.

Total market capitalisation (m-cap) of the BSE-listed companies surged by over Rs 10 lakh crore to Rs 148.73 lakh crore on September 23 from Rs 138.54 lakh crore on September 19, as concerns over trade war and economic slowdown slashed half the gains.

As a result, market value of the BSE-listed firms came down by Rs 5.55 lakh crore to Rs 143.18 lakh crore last Friday.

“The market witnessed profit booking after a huge 8 per cent rally on following the corporate tax cut. RBI’s repo rate cut didn’t inspire confidence among investors due to sharp downgrade in GDP growth forecast,” said Vinod Nair, Head of Research, Geojit Financial Services.

Shares of Indiabulls Housing Finance plunged up to 44 per cent while those of Indiabulls Ventures tanked 40 per cent in last seven sessions after climbing over 10 per cent and 16 per cent, respectively, during September 20-23.

Among the BSE500 stocks, 51 out of the 150-odd stocks, which had rallied over 15 per cent in the two-day rally, came down by up to 25 per cent. As many as 52 stocks have fallen by over 10 per cent, while 21 shed over 15 per cent.

Stocks like Edelweiss, NCC, RBL Bank, State Bank of India, Bombay Dyeing, Ashoka Buildcon, Delta Corp, Future Consumer, NBCC and Union Bank of India have eroded between 16 and 31 per cent of investor wealth since September 24, after rallying up to 32 per cent in just two sessions after the Finance Minister announced the corporate tax cut.

Stocks from sectors like finance, banking, automobile, infrastructure, textile and realty have taken the biggest hit in the downturn.

Analysts said continued weakness in auto sales was another setback amid the ongoing selloff in the market. “The consolidation was broadbased, but banking stocks were particularly under severe pressure due to fresh stress in the system, which has impacted investor sentiment,” said Nair of Geojit.

In the broader market, 151 stocks from the BSE500 index surged over 10 per cent during the euphoric rally in two days. NCC surged up to 32 per cent during this period, while Motilal Oswal Financial Services, ICICI Securities and Ashok Leyland advanced 28.6 per cent, 29.3 per cent and 29.9 per cent, respectively.

Of the 151 stocks, 135 have eroded up to 44 per cent of investor wealth since September 24. Even the benchmark indices gave up 4.5 per cent of their gains.

“Risk aversion is high currently, as people are not being able to put their finger on what exactly needs to be done to get the demand back on,” Sunil Subramaniam, CEO of Sundaram Mutual Fund, told ETNOW.

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