Markets collapse, Rs 3.4 lakh cr investor wealth wiped out

Mumbai: The budget annoucement coincided with massive selling in the market. The Sensex plunged by over 1,000 points intra-day, its biggest fall in a decade, as the budget failed market expectations.

Investors pressed the sell button on Saturday as the finance minister Nirmala Sitharaman pegged the fiscal deficit at 3.8 per cent for the current fiscal, compared with the earlier target of 3.3 per cent of GDP and no growth-boosting measures were seen in the lengthy document for the sagging economy.

The Sensex ended 987.96 points, or 2.43 per cent, lower at 39,735.53. On similar lines, the Nifty-50 plunged 300.25 points, or 2.51 per cent, to close at 11,661.85.

Investor wealth, measured in terms of value of all listed shares on BSE, eroded by Rs 3,46,256.76 crore to settle at Rs 1,53,04,724.97 crore.

This was the benchmark's biggest drop since October 24, 2008, when it had plummeted 1,070.63 points, and the fourth biggest fall overall.

“Expectations were very high and therefore market is a bit disappointed but there are a lot of incentives for the foreign investors,” said Nirmal Jain founder & chairman, IIFL.

Since the last Budget presentation in July 2019, the Sensex has gained only  222.14 points or 0.56 per cent, while the Nifty slumped 149.30 points or 1.26 per cent.

Sitharaman also proposed lower income tax slabs for those foregoing various exemptions, and removed dividend distribution tax on companies, effectively shifting the tax burden to the recipients.

Analysts said income tax slab rejigs stoked fears of declining inflows in tax-saving investment aven-ues, while the proposed transfer of dividend distribution tax to investors added to the negative sentiment.

"The lack of major growth boosting measures in itself is negative for the equity market. The new income tax regime would also be negative for tax exempt equity savings schemes. Recasting of dividend taxation norms also seem to be on the balance negative for most domestic equity investors. Overall, the budget seems to be negative for the equity market," said Sujan Hajra, chief economist and executive director, Anand Rathi Shares & Stock Brokers.

The biggest losers in the Sensex pack were ITC, L&T, HDFC, SBI, ONGC, ICICI Bank and IndusInd Bank, losing over 6 per cent. Sectorally, the BSE Rrealty Index plunged 7.82 per cent, followed by capital goods, industrials, finance, Bankex and metal. IT and Teck ended with gains of up to 1.41 per cent.

Sitharaman said certain government securities will be open for foreign investors, adding that the Centre plans to increase investment limit for FPIs in corporate bonds from 9 per cent to 15 per cent.

"We are extremely disappointed with the budget. No significant announcement for industry or consumers. Namesake changes in income tax slabs only to create political mileage that may not lead to any significant changes in growth prospects in near-term, Abhinav Gupta, President, Capital Market, Share India Securities, said.