Speculation on PM’s speech on Long-Term Capital Gains Taxation

Prime Minister Narendra Modi said the tax collection from capital market participants as “low”, and attributed it to loose tax laws and possible fraud. Market Participants and Media started speculated it as a signal to increase Long Term Capital Gains. Even rumours ciculated in Social Media (not virally though) that this effect could bring imminent crash in the markets.

PM’s Speech on Capital Markets on 24th Dec 2016

Very next day Finance Minister Arun Jaitley clarified that PM’s speech has been interpreted in some section of media which has started speculating that this is the indirect reference to the fact that there could be a long term capital gains on security transactions. He stated that this interpretation is erroneous and Prime Minister had made no such statement directly or indirectly.

Finance Ministers Speech on the Clarification of PM’s Speech

However Markets are not convinced with the Finance Ministers Clarification on PM’s Speech. SGX Nifty was trading down 30 points before the pre-open in the morning. And Both Nifty and Bank Nifty index witnessed selling pressure in the first 1 hour followed by sideways action rest of the day. Nifty lost 77 points and Bank Nifty lost 228.45 points on the index during the market close on Monday Trading Session(27th Dec 2016).

Nifty Index – 1minute Charts

Bank Nifty Index – 1minute Charts

India VIX – 1min Charts

India VIX was up by 9.75%. Rising VIX index shows that markets closed on a bearish note as clearly market participants are still not convinced with the finance ministers clarification on PM Speech. Major Selling witnessed in Banks, Realty, Pharma , Metals and Media stocks.

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