Insurance stocks recovered on Monday after cracking on budget day as brokerages said the new optional personal tax system with nil exemption would only have a limited impact.

Finance minister Nirmala Sitharaman had announced in the budget that individuals would have the option of new taxes with lower rates. This will come at the cost of exemptions, which include those available on insurance premiums. The stocks of insurance companies fell on Saturday after Sitharaman’s announcement.

However, brokerages feel the proposal is unlikely to have a major impact as there is the option to choose from the current and new system, with many likely maintain status quo. They, however, cautioned it will be a different story if the government does away with all the exemptions over a period of time.

Brokerage Motilal Oswal said in a report that the removal of the exemption could adversely impact the sale of life insurance policies as typically the fourth quarter of every fiscal is business-heavy owing to an increased focus on tax-saving investments.

However, the skewness has declined over the past few years with the proportion of premium being underwritten in the fourth quarter to total premium showing declining trends for all listed insurers, barring Max Life.

“Though some tax payers might shift to the new tax regime, with increasing consumer awareness, we expect the impact to be modest,” it added.

Analysts at JM Financial, too, said that there would not be any near-term impact. “Given the long-term nature of insurance products catering to both the savings and mortality risk cover needs of individuals, we see limited impact on their appeal,” they added.