After a rollercoaster ride on Monday that saw many ups and downs during the course of finance minister Arun Jaitley’s speech, equity markets ended more than 0.5% down as budget proposals didn’t excite investors and global markets remained volatile.
The benchmark BSE Sensex fluctuated between green and red throughout the day.
Opening at 23,238.50, the Sensex hit a high of 23,343.22 after Jaitley started his speech.
It hit a low of 22,494.61 on tax levies on securities before closing at 23,002, down 152 points or 0.7%. The Nifty also saw similar trends before ending at 6,987.05, down 43 points or 0.6%.
The allocation for recapitalisation of state-run banks was lower than expected and there was no reduction in corporate tax, a higher STT (Securities Transaction Tax) on options and an additional 10% tax on dividends in excess of Rs 10 lakh sent negative signals.
State-owned Oil and Natural Gas Corporation was the biggest loser, falling 9.7% after announcement of a 20% cess on domestically produced crude oil, much higher than an expected 10%. Other losers included Maruti Suzuki (down 5%), BHEL (down 4.2%) and tech stocks like Infosys, Wipro and TCS which fell 1-3%.
Industry was impressed with the government’s prudence. “Every budget is a balance between efforts to boost growth and to keep a check on expenditure given the revenues at its disposal,” said Ajay Srinivasan, chief executive at Aditya Birla Financial Services. “The decision to stick to the fiscal deficit target of 3.5% for the year clearly suggests that the government chose prudence over a large fiscal stimulus.”
Despite the lower-than-expected Rs 25,000 crore allocation for capitalisation of state-run lenders, banking stocks gained. The fiscal deficit target of 3.5% fueled speculation that the Reserve Bank of India may cut rates again.
The banking index closed up 1.1%, with ICICI Bank rising 2.8%, SBI (up 1.4%) and HDFC Bank gaining 1.3%.
Some infrastructure stocks such as Jaiprakash Associates, HCC and IRB Infra were also among the gainers following measures for boosting spending to upgrade roads and highways.
“Investment in roads, railways continues to be the underlying theme given private investment is weak. It is a budget that is positive and progressive with broad-based focus on rural India, infrastructure investment, financial sector reforms and taxing the rich to pass on to the poor. It gives much sense for optimism, both for the common man and the corporate,” said Rashesh Shah, chairman, Edelweiss Group.
Mixed trends in global markets also added to the nervousness. “The result of the budget is that we are little stronger than yesterday, but we are still in troubled waters. This is still an uncertain world and that will continue to weigh on markets,” said Leo Puri, managing director of UTI Mutual Fund.