Govt's proactive action can boost investor sentiment: Analysts

With all the guessing game and uncertainty now over after the allocation of six key portfolios, the market is expecting the new government to deliver strongly on issues that will help the domestic bourses continue on their uptrend.

Market experts believe, among other things, the treatment of security transaction tax (STT), increase in the individual tax bracket and alteration in market timings are some key issues, that can help boost investor trading sentiments.

"Treatment of STT as per the erstwhile procedure of rebate in the tax payment can be a major market moving step as this will help in increasing the trading volume giving more depth to the market and the arbitrage activity," SMC Capitals equity head Jagannadham Thunuguntla said.

Elaborating further he said, increase in tax payment bracket would indirectly help the domestic equity market as people would have more money to spend, which will eventually help the consumption-driven market.

Veteran politician Pranab Mukherjee, hailed as one of the five best Finance Ministers in the world in 1984, will re-enter the North Block as Finance Minister of the new Congress-led UPA government.

Experts are of the view that with Mukherjee taking charge of the finance portfolio, market would now wait for the budget to give their thumbs up or thumbs down to the new minister.

"The budget deficit is very high and the market would look at what step the government is taking to minimise that," Taurus Mutual Fund Managing Director R K Gupta said.

Meanwhile, SMC Global Vice President Rajesh Jain said: "The allocation of portfolios is mostly on the expected lines. Pranab Mukherjee is a veteran politician and would accelerate the economic reforms."

Steps can also be taken to streamline the timings of the domestic market with the foreign bourses, as it would help in boosting inflows from foreign institutional investments, market observers added.

"Mukherjee is acquainted with the high budget deficits India has. Now that the Left parties are not there, the government can take policy action confidently," Ashika Stock Brokers Research Head Paras Bothra said adding that the core team of the UPA government remains more or less the same and it has scope to deliver the way market thought they would.

The new Congress-led UPA government has said it will strive to pass the Union Budget for 2009-10 by July 31 to restore the growth momentum of the economy reeling under the impact of the global financial meltdown.