Finance Minister Nirmala Sitharaman has revised the slabs under the new tax regime, bringing significant savings for taxpayers. The revised structure offers no tax on income up to Rs 12 lakh, while those earning up to Rs 24 lakh shall be able to save up to Rs 1.10 annually on the tax paid by them. The market participants believe that the additional disposable income is set to push domestic consumption.
The budget provided a major boost to consumption with the massive reliefs on income tax front for the lower and middle class. The middle class has a reason to cheer after a long time as the tax exemption limit to Rs12 lakh shall leave more money in the hands of consumers, boosting the disposable consumption, investments and more.
Dhiraj Relli, MD and CEO, HDFC Securities said that the government has extended the tax-free threshold to a remarkable Rs 12.75 lakh under the new tax regime. This magnanimous gesture translates into an unprecedented infusion of Rs 1 lakh crore into the hands of middle-class households nationwide.
"Such a substantial enhancement to disposable income promises to invigorate the marketplace, mainly benefitting the fast-moving consumer goods sector and durable goods manufacturers, as families find themselves empowered to fulfil their essential needs and aspirational purchases with renewed confidence," he said.
The revised tax structure leaves more money in hand for the middle class, empowering retail investors to allocate more towards wealth creation, said Harsh Jain, Co-founder & COO, Groww. "This will further boost financialization of savings, as retail investors look to build long-term financial security," he said.
Consumption led stocks including Blue Star surged more than 11 per cent, while Radico Khaitan and Avenue Supermats gained 9 up to per cent for the day. Stocks including RR Kabel, Godfrey Phillips, Sapphire Foods, Juniper Hotels, Ethos, Crompton Greaves, Trent and more surged 7-8 per cent each.
Other counters including Redtape, Campus Activewear, Westlife Foodworld, Zomato, Angel One, SBI Cards, Anant Raj, Bata India, Havells India, CarTrade Tech, Bikaji Foods, United Spirits, Senco Gold, Shoppers Stop, Vmart Retail, Vishal Mega Mart, Indian Hotels and more gained 5-7 per cent each.
Consumption theme to get a big boost with increase in tax slabs. The government has put in more money in the hands of the middle class and with this change in taxation it will boost the slowing consumption, said Apurva Sheth, Head of Market Perspective & Research, SAMCO Securities. "This is a major positive for FMCG, Auto and Consumer Durable stocks," he said.
This rise in savings is likely to fuel increased inflows into SIPs and other investment avenues, benefiting AMCs and wealth management firms, said Raj Gaikar, Research Analyst at SAMCO Securities. He sees HDFC AMC, Nippon AMC, Anand Rathi, Nuvama Wealth, and 360 One Wealth as well-positioned to see revenue growth.
The rise in disposable income would directly benefit FMCG companies like HUL, ITC, Dabur, and Nestle, with indirect gains for their suppliers such as Polyplex and Uflex, said T Manish, Research Analyst at SAMCO Securities. "Increased disposable income may also support discretionary spending and premiumization plays, including stocks like Ethos, Landmark cars, and KDDL," he said.