Today’s close of Sensex, 17000+, is the highest close in the last 16 months. The last time Sensex closed above 17K is in May 2008.

BSE Sensex has a positive run during all 5 days of the week and stayed stable above the 16000 mark. However, intraday volatility on a couple of days is a good reason for concern.

Tuesday’s closing price of BSE Sensex (16123.67) is 209% of its annual lows. And this is the first time the index has hit this closing price since 30 Jun 2008.

Also, gold is $1000 an ounce for the first time.

France and Germany reported surprising recovery from the recession during the second quarter. Read here and here. This recovery also almost pulled the euro-zone into non-negative territory.

India Inc., is considering new tax laws from 2011. These would be “written from scratch” tax laws that change the current slab systems as well as few other deep rooted notions of taxation. Most of the proposed changes appear to be helping the individuals and the economy, except for one: taking out the benefit on interest paid on home loan (when the home is not rented.) This step severely impacts the housing market as well as the wealth planning of individuals. In the absence of appealing retirement plans, (like 401-k plans in US) people in India consider investment on home as a major component of their retirement plan. If someone gets a tax break for 1.5L every year over a period of 10 years, then that person is getting a decent tax break on 15 lakhs of rupees (close to 30K USD). That is a huge saving from a retirement planning standpoint. If the tax break is taken out, then it will discourage that sort of wealth planning.

BTW, I am looking forward to the new tax laws for the following reasons:

• Incremental tax percentages for higher slabs rather than applying the tax percentage for the entire income. For example, if you earn more than 5 lakhs today, your entire income is taxed at 30%. In future, only the amout higher than 10 lakhs will be charged at 30%.
• Ability to perpetually forward losses to future years. This will help investments in markets.

India auto sales saw a considerable growth in July, compared to a year ago. The car industry numbers are here. The sales in India are orthogonal to the industry numbers across the globe. With the banking industry and auto industry showing very positive signs, the India markets make a very different financial backdrop.

India PC market shrunk by 6 percent year over year in the Q2 of 2009. This is a better number when compared to 11% decline in first quarter. Read more here.

India’s Sensex lost about 10% in 5 sessions of this week. The much anticipated budget didn’t go aggressive enough to make the market react positively.

In this backdrop, it will be interesting to see how the companies react. Even though the bad news in Indian markets is not that much, I feel several companies are holding up bad news anticipating a quick turnaorund. With the markets being not so positive after the budget, it will be interesting to see how these companies would react now. Needless to say, the market trends in India are mixed. Car/Bike sales are up, apparel spending is down, FMCG sales are flat or postive, etc. Interesting to see how companies in each of these segments react now.

Even though I felt positive about scraping the FBT, I heard different views on the impact of the FBT removal. An interesting analysis here. Unless the companies are willing to pay for the administrative charges, the new budget will burden employees with more taxes and less money at their disposal.