Corporate Tax rate slashed to 25% ; small cap index flat to positive

Market was expecting the corporate tax rate to go down in the pre-election budget and benefit the companies. With focus on the budget for the MSME companies, finance minister gave big tax relief by slashing corporate tax rate to 25% from 30% earlier for FY18-19 for companies with revenue upto Rs.250cr.

This can lead to direct increment in earnings of  small cap companies. Small caps saw chopping last week on stock market and this news can come as a respite to the small cap companies. We can expect earnings if small cap to see lower tax rate and hence higher EPS from Q1FY19.

With broader market, swaying from positive to negative, small cap index was flat to positive. However, market was expecting a broader cut across all companies and this has been a disappointment.