Market sings the blues
Mirroring India Inc’s disappointment over finance minister P Chidambaram’s budget, the Bombay Stock Exchange (BSE) sensitive index fell to a three month-low — shedding 291 points, or 1.52% — to close at 18,861.54 on Thursday.
The National Stock Exchange index, Nifty, dropped 103.85 points or 1.79% to 5,693.05.
Rikesh Parikh, vice-president of broking firm Motilal Oswal, said markets reacted negatively to the higher revenue projection from divestment and spectrum sale, as it could lead to a higher-than-estimated deficit number. “Also, amendments indicating the submission of residency certificate would not be sufficient for claiming benefits brought the scare of the General Anti-Avoidance Rules among institutional investors,” he said. GAAR has been enacted to check tax avoidance.
Analysts say concerns about taxes on foreign institutional investments and rich individuals also impacted sentiments. Among indices, the power sector was the worst performer. Hit by the additional duty on coal imports, the power index dropped 4.3% on the BSE.
Besides, raising the public borrowing target to a much higher level than the market expectations triggered concerns about liquidity in the banking system. The BSE Bankex dropped 3.6% and impacted the overall market sentiments.
The shares of private sector banks also declined as the finance minister proposed to extend the low-cost farm loan scheme to private lenders.
Shares of Adani Ports and Special Economic Zone dropped 3.2% after the budget proposed two new ports in Andhra Pradesh and West Bengal, raising competition concerns.
Despite incentives, such as reducing the securities transaction tax on equity futures market continued its slide.
According to brokers, derivatives expiry and liquidity problems faced by some corporate houses and traders might have added to selling pressure. Shares in capital goods, oil and gas and realty stocks also plummeted while consumer durables and IT indices showed gains.
“On the whole, the Union Budget had nothing to lift the sentiments and was a non-event,” said broking firm chief Asit C Mehta in a note.
Many areas were largely unaddressed. Although measures to boost growth were announced, they seemed more like a political agenda rather than a path to fiscal consolidation and growth recovery.