Nifty Jumps Over 5% after Corporate Tax Cut

Nifty 50 and Sensex jumped almost 5% at 11,236 making fresh 7-week highs, in biggest one-day gains in ten years after India’s Finance Minister Nirmala Sitharaman announced a cut to corporate tax rates for domestic companies to 22%. The tax cut will have an immediate impact to stocks as it will increase profitability and now Indian companies can compete with lower taxes other countries. On the macro side the reduction in corporate taxes will increase the fiscal deficit with negative impact on India’s bonds.

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Nifty has formed a strong floor at 10,681 since August which absorbed all the offers and signalled the rebound which today gave the strong rebound breaching the 50 and 200-day moving averages. Nifty 50 momentum is bullish now, and an attempt to higher levels looks possible. On the upside immediate resistance is at 11,272 today’s high while more pressure will be met at 11,309 the high from July 29th, a break above that level can drive the index up to 11,418 the 100-day moving average. On the downside Nifty 50 first support stands at 11,114 the 200-day moving average which turns from resistance to support while more offers will emerge at 10,691 the daily and yearly low. Traders looking to enter long positions can buy if the index closes today above 11,229 the 50-day moving average, targeting the 11,418 resistance level for profits, and can keep their long positions as far the index is trading above the 11,000 mark.Download our latest quarterly market outlook for our longer-term trade ideas.

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