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Stock market slide belies Centre's Budget hopes

Budget was geared to bring back small investor to stock markets. But with markets taking a tumble, Govt isn?t likely to take the bait.

india Updated: Mar 08, 2003 01:52 IST

Finance Minister Jaswant Singh’s feel-good budget was geared to bring back the small investor to the stock markets. However, with the markets taking a tumble, he isn’t likely to take the bait.

In the last five trading days, the Sensex has lost over 130 points. The 30-share index closed near a four-month low of 3,153 points on Friday owing to selling in Infosys, Satyam, HPCL, Reliance, SBI and Tisco scrips.

Fears of an imminent US attack on Iraq and the overall slump in the markets globally have combined to hit the already listless stock market at home.

Jaswant Singh’s proposals on long-term capital gains tax may also force investors to sell their stocks in case they want to avail of tax exemptions.

It’s a no-win situation where investors have to sell their portfolios whatever the state of their portfolios. Say, an investor pumped in Rs 100 crore in the market over a year ago. In the meantime, if the value of his portfolio has grown to, say, Rs 150 crore, he has to pay capital gains tax of 10 per cent.

To avoid that he has to sell his portfolio — which, of course, leads to further selling pressure — after March 1 and reinvest that money in the market. Strange, but that's the way the proposal works.

Fresh funds aren’t coming in either. “In the current scenario, it is unlikely that foreign fund managers would invest in emerging markets,” says Ashok Pandit, head of equity, ABN Amro Bank (South East Asia). Their first priority is to protect capital, he said, and added that most fund managers in the US aren’t planning to invest abroad.

In Japan, the Nikkei plummeted to a 20-year low, while Korea's Kospi hit a 16-month low. Taiwan's Taiex and the Hang Seng in Hong Kong also headed south.

First Published: Mar 08, 2003 01:39 IST