Our Bureau

Mumbai , July 21

THE relief on transaction tax announced by the Finance Minister was greeted with cheers by both debt and equity markets.

Stock prices, which were rangebound all morning, shot up immediately following the Finance Minister, Mr P. Chidambaram's announcement cutting the proposed 0.15 per cent transaction tax to 0.015 per cent for day traders. The tax has also been reduced to 0.01 per cent for derivative instruments.

Bond deals are completely exempted from the transaction tax.

Ms Deena Mehta, Director, Asit C Mehta Investment Intermediaries, said: "We are happy with the changes announced by the Finance Minister. All our concerns have been taken care of by Mr Chidambaram."

The Sensex breached the 5000-mark following the announcement to touch an intra-day high of 5041.19.

Subsequently, the index dipped on profit-booking and ended the day's trading at 4993.76, up 35.88 points from Tuesday's close.

On the NSE, the Nifty shot up 31 points in eight minutes after the announcements. The index touched 1600.70 before closing at 1581.40, a gain of 12.3 points, up 0.98 per cent from its previous close.

The new structure of transaction tax that was announced has buoyed the market sentiment considerably.

Today's announcement is very pragmatic and promising. In fact, it is significantly better than what the market was expecting," said Mr Ramesh Damani, a BSE broker. "The market is expected to open with a gap tomorrow. There would be a lot of interest in mid-cap scrips as money sitting in the sidelines currently will now get pumped in," he said.

"The Finance Minister has tried to balance what the market wanted with his requirement of collecting revenues. Though the announcement has enthused the market, there are other factors like the monsoon that would give direction to the bourses," said Mr Paras Adenwala, Head - Equities, Birla Sun Life Asset Management Company.

Bond prices reacted positively to the news of bonds deals being exempted from the transaction tax net with prices rallying by 40-50 paise across maturities.

Trading volumes surged to Rs 2,500 crore - Rs 3,000 crore indicating renewed buying interest as compared to lower volumes of Rs 500 crore -Rs 1,000 crore witnessed over the past few days.

The 10-year benchmark paper 7.37 per cent 2014 closed at an yield of 5.83 per cent, lower than yesterday's level of 5.91 per cent.

Mr R. Venkatnathan, Chief Dealer, SBIDFHI, said, the market had factored in the removal of transaction tax but it bounced back from the dampener of US Fed rate hike expected in the near term.

Bond prices are expected to be rangebound in the next few days, as the underlying sentiment is still weak.

The market might revive if some positive signals are sent by the regulator to the participants.

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