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Sanjeev Prasad said, “The recent imposition of new taxes or increase in tax rates in some sectors may help the government to generate additional revenue and fight inflation, but it also affects corporate profits and market capitalization and India’s overall investment climate.” will harm too.” Head of Kotak Institutional Equities.
“The major reason for our recent earnings decline is new taxes. We can only hope that these measures are for a limited period and do not extend to more sectors.”
The government on Friday imposed an export tax of Rs 6 per liter on petrol and aviation turbine fuel (ATF) and Rs 13 per liter on diesel and an additional excise duty of Rs 23,250 per tonne on domestic crude oil production.
Earlier, on May 21, the government raised export duty on iron ore and some steel intermediates to increase their local availability and check price rise.
Analysts have cut the Nifty metal sector and oil and gas sector’s projected net profit by 34% and 12%, respectively, for 2022-23, on account of increased taxes.
Steel companies have lost nearly 20% of total market capitalization, or ₹1.11 lakh crore, since May 23, while oil and gas stocks wiped out nearly 7% of investor wealth, or ₹1.45 lakh crore, in the last three trading sessions Is.
International metal prices have also corrected recently as China’s metal prices fell to a 16-month low with increase in inventory.
Selling in steel, oil and gas stocks
shares of
and Oil India have fallen by about 16% and 24%, respectively, since Friday, while they have fallen by more than 25% since May 23. The Nifty 50 index is down 3% since May 23 and has risen marginally since June 1.
VK Vijayakumar, chief investment strategist, said, “The sentiment for the metals and oil sector has been impacted by taxation decisions – unpredictable taxes and export taxes related to the sector,” said VK Vijayakumar.
, “Even if the market cleverly rebounds from current levels, the steel sector is unlikely to participate in the rally,” he added.
The recent tax decisions of the government will reduce the profits of the upstream oil PSUs, while the downstream oil marketing companies (OMCs) will continue to incur huge losses on retail sales of diesel and marketing margins on diesel and gasoline, as long as the government imposes excise duty on diesel and gasoline. Doesn’t reduce Analysts said by a similar amount and allow OMCs to retain profits.
“The uncertainty in earnings of metal and oil and gas PSUs will further impact investment sentiment for PSU stocks and potentially derail the government’s privatization programme,” said Sanjeev Prasad, managing director, Kotak Institutional Equities.
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