A much better day today. Although the markets stayed within the range of yesterday, they moved towards the higher end of the chart, as I will show you very soon. While today’s movement wasn’t a major takeoff, it was very reassuring. Sectors that were getting hammered remained stable, and there was no panic during the day. The market opened with a good gap and stayed virtually undeterred from that position for the whole day, which is giving a lot of confidence.

It seems that a lot of panic sellers, of two kinds, are always present. First, people who will put their funds for redemption. When the market cracked on Monday, people may have panicked and asked for redemptions, which the funds would have sold the next day. That is one kind of selling pressure that comes on the second day. Then there are a lot of F&O traders who fight till the end of the first day when falling long traders are unable to give margins, and the brokers cut their positions the next day. Those pressures also get taken off. So usually it takes about two days for the very immediate pressures to be taken off the system. From the third day onwards, either the markets will stabilize and start to inch up, or if there is continued selling pressure, then the subsequent fall happens.

Today I was happy to see that at least the previous two days’ lows were not breached, and we stayed towards the higher end of the spectrum.

There is a new real estate taxation amendment with two very delicate nuances to it, and we will talk about these amendments towards the second half

Market Overview

So, where is the market headed? You can see here that while the last two days were extremely tentative, looking like we were losing grip, today’s session was still very reassuring. We closed much higher than the previous two sessions, with a +1.2% on the Nifty, taking support at the 40 DMA, which is a good point to take support from as it has on earlier occasions. The crossing of these highs now will sort of be the first indication that the market is indeed strong, or we may spend more time consolidating here. A break of today’s low would also be a bit weak going forward. In the coming sessions, today’s low should not be breached. That is the cue for long-term, long-only traders.

Nifty Next 50

Nifty Next 50 has also returned to the 40 DMA, although it’s not yet broken it. But it was a good session, very near the two-day high at 17,400. It is not so far from covering this gap. Overall, it was a good session in Nifty Junior with a +3% increase.

Nifty Mid and Small Cap

On the Nifty Mid Cap, we are very near the average of the 40 DMA. There was not much difference between the open and the close. As I mentioned, the market remained largely stable after a brief dip, with a 2.2% increase on the Mid Cap index. The Small Caps also closed very near the highs of the previous two sessions, a bit below the 40 DMA but still within the established range. There was a 2.39% increase in Small Caps.

Nifty Bank Overview

The Bank Nifty had an inside day, maintaining 50,000 on a closing basis at +0.75%. It is a bit farther away from the 40 DMA and its all-time high. So Bank Nifty is not the leading indicator as of now.

Nifty Heatmap

The heat map shows a lot of green today, but oil is the one which is boiling. ONGC was up 7.5%, Coal India up 6.3%. Other stocks like BPCL and Oil India also saw gains. IT stocks were up, with Infosys and Wipro performing well. Auto stocks like Maruti, Mahindra, Bajaj, and Tata Motors also saw increases. Pharma stocks and power stocks were doing well. Adani stocks did well overall, and HDFC Bank also performed well with a 1.39% increase. It was a very good day for Nifty stocks.

Nifty Next 50 had more green, with bright greens on public sector enterprise stocks which were brutally hammered in the last two-three sessions. HAL, BEL, and railway stocks like IRFC were up 3.4%. Zomato was up 6.6%, IOC was up 3%, and FMCG stocks like Marico, Colgate-Palmolive, and Godrej Consumer Products all saw increases. GAIL was up 4.5%, and PFC, REC were doing quite well. Real estate stocks on the back of this new development were also up. Overall, it was a very good day from a Nifty Next 50 basis.

Sectoral Overview

Here you can see public sector enterprise stocks were up 3.9% in a single day, indicating some short-term bottom. IT was up 2.7%, commodities up 2.2%, pharma up 2.2%, energy up 2.2%, and real estate up 1.8%. Autos were up 1.7%, infrastructure up 1.6%, and IT up 1.5%. Private banks were the least impacted. The week still remains red, but there was a good recovery from a one-day perspective on the markets.

Sectors of the Day

Nifty Oil and Gas

Oil and gas stocks are already into the gap, probably the strongest of many sector charts, where the closing has moved into this gap higher than the two-day highs, which is always a very good sign after a sharp drop of 3%.

Nifty PSE Index

You can see public sector enterprise stocks have virtually bounced from this support and are now very close to the two-day high, similar to where Nifty is, with a 3.9% increase.

Stocks of the Day

Tejas Networks

In the stock spotlight, Tejas Networks was up remarkably by 12.1%. You can see the last two sessions are way below, and now it has almost gone to a weekly high and is not so far from an all-time high. It was a very fast recovery in Tejas Networks.

Story of the Day

Now, let’s discuss the truth behind the real estate amendment. Real estate stocks have rallied today on the LTCG rules being looked at again by the finance ministry. Stocks like Oberoi Realty, DLF, Macrotech, and several others went up. Sobha was the odd one out which did not rally today. The real estate index also crept up, although it is nowhere near its previous highs, but it increased by 1.8%.

So what Finance Minister Nirmala Sitharaman has done is they are moving an amendment in the finance bill so that people can choose between the 12.5% long-term capital gains on real estate or 20% with indexation on properties acquired before July 23, 2024. This amendment will only be applicable to properties acquired before the budget. Anything acquired after the budget will not be affected by this amendment. Let me make this very clear now. A lot of folks and several channels are spreading misinformation that it is a rollback, but it is not. It is a provision allowing you to compute your taxes based on either 12.5% or 20% with indexation for properties bought before July 23, 2024, and you can choose the lower of the two taxes.

There has been a lot of backlash due to the removal of this indexation benefit, and the clamor made the government rethink the decision. Middle-class homeowners, whose properties have not even beaten inflation, were getting hit, and they wanted a reduction of tax burden on their real estate sales. The government listened to these concerns and provided this additional provision to reduce tax impact, but it is not a complete rollback.

Notice this one thing: besides the changes they’ve done, no one was crying about LTCG in stocks going from ten to 12.5%, short-term capital gains going from 15 to 20, or options and F&O costs going up almost 60%. If you’re not going to protest, you will not get anything. This is a very clear outcome of this. So whenever there are proposals, if you are hurt or impacted, you should let your voice be heard. Tweet, send emails, all that. This clamor has helped the real estate folks move the government to rethink. Capital market folks, maybe because they made so much money in the last four years, decided to pay some more tax. If that’s their stance, then it’s okay; they will get taxed more anyhow.

Coming back to real estate, besides the middle class and those impacted, the real estate lobby is also very strong. Some very large corporates, who are close to the government, also help in lobbying from that angle.

Ajay Ruthi, who I follow on X, came out with a brilliant point that this is not a rollback. It is the best of the two for properties bought before July 23, 2024. One standout case is if you bought something in 2000, 2001, and indexed it, even after indexation, there is zero capital gains or loss. In that case, you will not get the benefit of carrying forward that loss. The government has been very smart; they say you pay the lower of the two taxes, but if you have a loss advantage, they will not allow you to carry forward that loss. It is an addition to the new provision, not a rollback.

Another nuance was brought out by CA Vivek Narsinghani. He said if someone was availing the Section 54 exemption, where you sell a property and invest the profits in the next one, but the next one is bought after July 23, 2024, the taxation applicable on 12.5% will be the amount required to purchase the new one. It may be a little more than what you might pay taxes on. So if you had a property, indexed it, paid the lower tax, but based on 12.5%, the capital gain amount would now have to be invested to avail of the Section 54 exemptions. It’s a very nuanced view but a great point.

Overall, it should be appreciated that the government listened to people and provided this additional provision. If the right noises are made, the government does listen. That is the takeaway from this episode.