Corporate Taxes Slashed; Bears Get A Knockout Punch

The NIFTY made the breakout of a lifetime this week, rising from the bottom Bollinger Band to close above the upper band on the daily charts. That is probably something market participants would get to see no more than a few times in their entire lifetime!

This big-bang move of slashing corporate taxes from 34% to 25.75% will undoubtedly have a telling impact across sectors, as it will encourage foreign institutional investors to invest in the country. Over time, the move would also expand the bottom-line of companies, and the profits will be utilized to kickstart the virtuous CAPEX cycle. Put simply, Friday’s announcement was nothing short of historic for the equity markets, as it would potentially halt the poor earnings growth cycle and reverse the trajectory over the next few quarters. The equity markets greeted the news with a resounding cheer, with the NIFTY skyrocketing 569 points on Friday, and the Bank NIFTY rising an eye-popping 8.31% in a single trading session.

It may well be possible that Friday’s spectacular breakout will prove to be a decisive turning point for the bellwether index, which has been languishing in the grip of a lengthy time correction since January 2018. The last two weeks have seen more than 300 points added to the index, and with the market staying above its October 2018 wave low, it can be said that the uptrend is intact at the moment. A strong momentum reversal seems to be in the offing, and short positions can prove to be extremely perilous right now. The Bulls are back in control at D-Street, and smart investors will jump in and stay put for the ride ahead!

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