After a tumultuous ride, the market ended lower on Union Budget day. See-sawing around 849 points, the Sensex swings were quite heady for investors throughout the day. As Finance Minister Arun Jaitley read out his Budget proposals for FY17, investors’ knee jerk reaction eroded almost 660 points from the benchmark indices. However, that did not last long and the biggest culprits ITC and SBI erased losses to pick pace in the market. A lower-than-expected recapitalisation of Rs 25000 crore hurt PSU banks especially SBI while ITC was reacting to excise duty of 15 percent on tobacco products. Both the stocks recovered and ended with 1-2 percent gains.
At remaining hours of trade, ONGC, Infosys and Maruti dragged market. ONGC slumped 10 percent, Infosys fell over 3 percent while the auto car maker lost 5 percent at closing.
The Sensex ended down 152.30 points or 0.7 percent at 23002, and the Nifty slipped 42.70 points or 0.6 percent at 6987.05.
Samir Arora, Founder & Fund Manager at Helios Capital says the biggest disappointment is the recapitalisation of Rs 25,000 crore for public sector banks. Arora says that it is like “trying to say (we) don’t believe in the issue.”
What also hurt market sentiment today was increase in securities transaction tax (STT). Rate of STT in options is proposed to be increased from 0.017 percent to 0.05 percent.
Ramesh Damani, Member, BSE that the Finance Minister has chosen wisely by imposing STT and dividend distribution tax instead of tinkering with long-term capital gains tax and has also kept sales tax stable.
Post Budget, Citi maintains a positive view on India, with a 27200 December 2016 Sensex target. However, it says Budget is unlikely to fire the market or the mood. It says rating agencies and RBI should like the decisive call on fiscal consolidation.
Meanwhile, Standard & Poor’s retained its sovereign rating on India despite the government sticking to its fiscal deficit target in Budget as it waited for further improvement in public finances. S&P said it would wait for the government to improve its net debt and fiscal consolidation and does not expect to change India’s BBB- rating with a ‘stable’ outlook until next year.
Jaitley said that the government will be able to meet its FY16 fiscal deficit target at 3.9 percent of GDP and reiterated its commitment to containing fiscal deficit at 3.5 percent of GDP in FY17.
Auto, capital goods and IT stocks were under selling pressure throughout the day. Auto stocks reacted negatively to FM’s proposal for a 1-4 percent infrastructure cess on cars across categories. There will be a cess of 1 percent on small petrol and CNG cars, 2.5 percent on diesel cars of certain capacity and 4 percent on other higher engine capacity vehicles and SUVs. Also, tax will be collected at source of 1 percent on purchase of luxury cars exceeding value of Rs 10 lakh.
IDBI Bank jumped 5 percent, as the government will also consider option of reducing its stake to below 50 percent.
Oil marketing companies rallied while ONGC fell 10 percent as the FM did not make any proposal for a re-imposition of 5 percent customs duty on crude. But aviation stocks tumbled on a hike in excise duty on aviation turbine fuel to 14 percent from 8 percent.
Foreign institutional investors net sold Rs 2,018 crore worth of equity shares today while domestic institutional investors bought Rs 1,445 crore worth of shares today, as per provisional data available on exchanges.
About 1087 shares advanced, 1395 shares declined, and 157 shares were unchanged.
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