Mumbai: Stocks went into a tailspin today after the government imposed capital gains tax on equities and said it will overshoot its fiscal deficit target, but clawed back most of the lost ground after domestic institutions stepped up buying.
The 30-share Sensex plunged over 460 points in afternoon trade after Finance Minister Arun Jaitley announced long-term capital gains tax of 10% on stock market gains exceeding Rs 1 lakh.
It finally ended lower by 58.36 points at 35,906.66, while the broader Nifty shed 10.80 points to 11,016.90.
Sentiment also took a hit after the Budget raised the fiscal deficit target for 2017-18 to 3.5% of GDP as against 3.2% earlier.
The target for 2018-19 has been fixed at 3.3% as against the Fiscal Responsibility and Budget Management Act target of 3%.
Markets reeled under heavy selling pressure during Jaitley’s Budget speech in the Lok Sabha, but large-scale buying by domestic institutional investors towards the later part of the session cushioned the fall.
The BSE Sensex started on an optimistic note at 36,048.99 and advanced to 36,256.83 points during the presentation of the Budget but turned negative after Jaitley announced long-term capital gains tax, hitting a low of 35,501.74.
However, it bounced back to close at 35,906.66, still down by 58.36 points, or 0.16%.
The NSE Nifty too saw volatility and ended at 11,016.90, down 10.80 points, or 0.10%. It hovered between 11,117.35 and 10,878.80 during the day.
On the Budget day in 2017, the Sensex had gained 485.68 points, while Nifty had rallied 155.10 points.
The Sensex and Nifty have risen by 7,765.02 points, or 27.59% and 2,300.50 points, or 26.39%, respectively since the last Budget.
“Market saw volatility after the announcement of 10% long-term capital gains tax and breach in fiscal deficit target.
“Spiking government 10-year bond yield to 7.5% is also creating some caution among investors. Better forecasts for tax collection, rural spend, GDP growth and job creation are the positives of this budget which is expected to retain the sentiment in the market,” said Vinod Nair, Head of Research, Geojit Financial Services.
Higher infra spending and lowering of the corporate tax rate to 25% for businesses with a turnover of up to Rs 250 crore bolstered investor sentiment.
Shares of food processing companies were in demand after the Budget proposed doubling the allocation for the sector to Rs 1,400 crore for the next fiscal.
Major gainers were Sheetal Cool, Avanti Feeds, Godrej Agrovet and Freshtrop Fruits, rising up to 10%.
Agriculture-related stocks such as NACL Industries, PI Industries, Action Construction Equipment and Monsanto India also caught buyers’ fancy following the Budget’s focus on the rural economy.
Meanwhile, foreign portfolio investors (FPIs) sold shares worth Rs 136.63 crore on a net basis while domestic institutional investors (DIIs) also bought equities to the tune of Rs 1,294.66 crore yesterday, provisional data showed.
Losers in the Sensex pack included ONGC, Sun Pharma, Dr Reddy’s, SBI, ICICI Bank, Reliance Industries, Tata Steel, Maruti Suzuki, Coal India, Tata Motors, Wipro, Axis Bank, NTPC, HDFC Bank, Axis Bank, Infosys and Bharti Airtel, declining up to 4.06%.
However, M&M, L&T, IndusInd Bank, Bajaj Auto, Asian Paints, ITC Ltd, Yes Bank, Hero MotoCorp, Kotak Bank, TCS, Power Grid, HDFC Ltd, Adani Ports and HUL finished with gains.
Among BSE sectoral indices, consumer durables fell the most by 1.78%, followed by healthcare 1.38%, oil & gas 1.28%, PSU 1.24%, realty 0.89%, bankex 0.64%, teck 0.20% and IT 0.09%.
Infrastructure, capital goods, auto, FMCG, metal and power ended in the positive zone.
In the broader markets, the mid-cap index fell 0.54%, while the small-cap index finished flat.
Coming to global markets, other Asian bourses ended mixed, tracking overnight losses on the Wall Street after the US Federal Reserve decided to keep interest rates unchanged.
European shares, however, were higher in their early deals.