Budget disappoints equity markets, Sensex down 152 points
29 February, Mumbai
The Union Budget announcements, combined with negative global cues, depressed the Indian equity markets on Monday.
Consequently, the barometer 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) ended the day’s trade in the red.
Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE), closed the day’s trade lower. It inched-down by 43 points, or 0.61 percent, to 6,987.05 points.
The Nifty touched a fresh 52-week low of 6,825.80 points.
The Sensex, which opened at 23,238.50 points, closed at 23,002 points — down 152.30 points or 0.66 percent from the previous day’s close at 23,154.30 points.
During the intra-day trade, the Sensex touched a high of 23,343.22 points and a low of 22,494.61 points — its fresh 52-week low.
Initially, the Indian equity markets opened on a negative note, as investors were seen cautious over the Union Budget 2016-17 and downturn in Asian indices.
The Union Budget 2016-17 was tabled in parliament by Finance Minister Arun Jaitley, whose tax proposals for the next fiscal depressed investors’ sentiments.
The key equity indices dipped to their fresh 52-week lows, as Jaitley proposed to hike the securities transaction tax (STT) on options trade from 0.017 percent to 0.05 percent.
“Rate of securities transaction tax in case of ‘Options’ is proposed to be increased from 0.017 percent to 0.05 percent,” Jaitley announced.
Further, the minister proposed a tax at the rate of 10 percent on gross amount of dividends which are in excess of Rs.10 lakh per annum.
“Dividend Distribution Tax (DDT) uniformly applies to all investors irrespective of their income slabs. This is perceived to distort the fairness and progressive nature of taxes,” the minister informed the Lok Sabha.
“Persons with relatively higher income can bear a higher tax cost. I, therefore, propose that in addition to DDT paid by the companies, tax at the rate of 10 percent of gross amount of dividend will be payable by the recipients, that is, individuals, HUFs (Hindu undivided family) and firms receiving dividend in excess of Rs.10 lakh per annum.”
Notwithstanding the down trend, markets briefly recovered from the day’s low, as Jaitley announced that fiscal deficit target was maintained.
According to market observers, fiscal prudence heightened chances of a future rate cut by the Reserve Bank of India (RBI).
In addition, an even lower fiscal deficit target gave strength to the Indian rupee.
The rupee which opened on a weak note, however, strengthened by 21 paise at close. It ended the day’s trade at 68.42 to a US dollar from its previous close of 68.62-63 to a greenback.
Furthermore, the minister disclosed the government’s expenditure figures on rural sector, infrastructure development, crop insurance, agricultural credit, skill enhancement and start-up initiative.