Budget aftershocks continue as Sensex nosedives

The government's budgetary proposal to tax share buybacks, increase minimum public shareholding in listed companies and increase in the tax burden on super-rich dampened investors sentiment

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Mumbai: Unable to bear with the Narendra Modi government’s socialist-populist turn manifest in the Budget proposals that was presented by Finance Minister Nirmala Sitharaman on 5 July, domestic equity benchmark BSE Sensex plummeted over 900 points in late afternoon trade Monday dragged by losses in index heavyweights HDFC Bank, L&T and Bajaj Finance, amid a heavy selloff in global equities.

The government’s Budget proposal to tax share buybacks, increase minimum public shareholding in listed companies and increase in the tax burden on super-rich dampened investors sentiment.

After plunging 907 points, the 30-share index was trading 755.87 points, or 1.91%, lower at 38,757.52 at 1545 hours. Similarly, the broader Nifty sank 246.75 points, or 2.09%, to 11,564.40.

Top losers in the Sensex pack included Bajaj Finance, ONGC, Hero MotoCorp, Maruti, L&T, NTPC, SBI, Tata Motors and Axis Bank, cracking up to 9% while Yes Bank, HCL Tech, TCS, TechM, M&M and Infosys were among the gainers, rising up to 5%.

In the previous session, the 30-share gauge finished 394.67 points, or 0.99%, lower at 39,513.39, and the Nifty sank 135.60 points or 1.14%, to 11,811.15, after the Union Budget proposal to raise public shareholding threshold fanned fears of an oversupply of new papers in an already overbought market.

According to traders, higher tax incidence proposed in the Budget for foreign portfolio investors and high net worth individuals is also weighing on investor sentiment here.

In the meantime, sources said that the government would look into the surcharge issue related to FPIs & examine concerns.

On a net basis, foreign institutional investors sold equities worth Rs 89.38 crore, while domestic institutional investors purchased shares to the tune of Rs 275.63 crore, provisional data available with stock exchanges showed Friday.

Besides overhang from the Union Budget, domestic equities extended losses tracking a major selloff in global equities, traders said.

Indian shares fell after the Budget as the stock market was looking for short-term boosts, while the government’s budget was actually a long-term vision, said Shankar Sharma, vice chairman and joint MD of First Global. “Markets being markets. If you were management coming up on an investor call and giving a 12-year plan or vision, I am sure your stock will tank too because markets are driven by immediate concerns. So, I think that is the reason why the markets fell because it wanted something right now, in the next few months or at least the next 12 months,” he said to CNBC-TV18.

Other Asian markets opened significantly lower as hopes of steep cuts in interest rates by the US Federal Reserve faded after the world’s largest economy posted better-than-expected jobs data Friday.

Shanghai Composite Index plunged 2.58%, Hang Seng 1.54%, Nikkei 0.98% and Kospi tumbled 2.20%.

On the currency front, the Indian rupee depreciated 30 paise to 68.72 against the US dollar.

Meanwhile, the global oil benchmark Brent crude futures were trading 0.56% higher at 64.58 per barrel.

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