Sensex scales 15-1/2 month high on surge in Q2 advance tax payment
Higher advance tax payment by some of the top firms in the second installment of 15 September 2009 means their profits may rise in Q2 September 2009 over Q2 September 2008. As per reports, State Bank of India, India's biggest commercial bank by branch network, has paid 71.5% higher advance tax at Rs 1,832 crore in the second quarter of 2009-10 over the corresponding period last year.
Software major TCS has reportedly paid 315% higher advance tax at Rs 220 crore in the second installment. Tractor major Mahindra & Mahindra has reportedly paid 540% higher advance tax at Rs 112 crore in the second installment.
Tata Motors paid advance tax of Rs 100 crore in the second installment, much higher than Rs 19 crore last year. But Larsen & Toubro paid Nil advance tax agains Rs 150 crore paid in the corresponding period last year.
Among public sector banks like Bank of India paid Rs 470 crore as against Rs 230 crore and Bank of Baroda paid Rs 412 crore compared to Rs 255 crore. Private sector lender Yes Bank paid Rs 58 crore as against Rs 33 crore in the corresponding period last year.
During the second quarter BPCL and Lupin paid Rs 312 crore and Rs 49.7 crore respectively as against Rs 40 crore, and 11.4 crore in the same period a year ago.Ambuja Cements paid an advance tax of Rs 150 crore for the July-September quarter vs Rs 70 crore in the previous quarter.
Also boosting the sentiment was a surge in the National Council of Applied Economic Research (NCAER) business confidence index to 118.6 points in the June 2009 quarter, up 37 points from previous quarter, when it was at its the lowest level since February 1998. The business sentiments have improved reflecting signs of economic recovery, NCAER said.
The think-tank said economic conditions are further expected to improve in the coming months as the impact of the Union budget 2009-2010 (FY 2010) begins to be realised. The increased government spending may provide some impetus to the domestic investment and consumption.
Comments by the Reserve Bank of India (RBI) governor D Subbarao after trading hours that the central bank will not unwind its accommodative monetary policy before ensuring recovery may further boost bourses tomorrow, 16 September 2009. Subbarao also said the RBI has to take a call on supporting recovery and stemming inflationary pressures.
A trigger for the stock market's rally in the past few days has been expectations that the government will release pay arrears to government employees in the second and final installment ahead of big festivals in October 2009. The payout would boost demand for consumer goods, appliances, cars and motorcycles. Consumer demand is a key driver of the Indian economy.
Remaining 60% of the arrears have to be paid as the government implemented the new pay scales with effect from 1 January 2006 after the 6th Pay Commission report was approved by the Cabinet with modifications. The government in August last year had decided to pay the arrears in two instalments of 40% and 60%. According to government calculations, the total arrears are estimated to cost Rs 29,373 crore.