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Indian shares fell on Monday in a volatile session, with energy companies such as Oil and Natural Gas Corp slumping after the government unveiled a higher-than-expected tax in its budget for 2016/17, offsetting hopes for rate cuts that had lifted bonds and the rupee.
The stock markets were disappointed with the increase in Securities Transaction Tax on options from 0.017 per cent to 0.05 per cent and also the Dividend Distribution Tax where Jaitley has proposed an extra 10 per cent tax in the hands of the investor on dividend income over Rs 10 lakh in a year.
The Sensex crashed to 22,494.61, a loss of 659.69 points, or 2.84 per cent soon after Finance Minister Arun Jaitley announced tax proposals in his Budget speech. The 50-share NSE Nifty dropped 203.95 points, or 2.90 per cent, to 6,825.80.
However, buying by domestic institutions and reports about an imminent rate cut by RBI helped improve the sentiment battered by the proposal for higher dividend distribution tax on those earning more and a proposal to increase securities transaction tax in some categories.
The 30-share BSE index Sensex ended lower by 152.30 points or 0.66 per cent at 23,002 and the 50-share NSE index Nifty ended down by 42.7 points or 0.61 per cent at 6,987.05.
Among BSE sectoral indices, infrastructure index fell the most by 2.12 per cent, followed by IT 2.11 per cent, TECk 2.00 per cent and capital goods 1.99 per cent. On the other hand, banking index was up 1.07 per cent, followed by realty 0.27 per cent, healthcare 0.23 per cent and metal 0.15 per cent.
Top five Sensex gainers were ICICI Bank (+2.79%), Reliance (+1.69%), ITC (+1.65%), Lupin (+1.42%) and State Bank of India (+1.38%), while the major losers were ONGC (-9.72%), Maruti (-4.88%), BHEL (-4.21%), Infosys (-3.33%) and L&T (-2.83%).
ONGC stock plunged after the government said it would change a tax called the Oil Industries Development Cess on locally produced crude oil from Rs 4,500 per tonne to a higher-than-expected 20 per cent of the value of the commodity.
Brokerages were disappointed about levy of tax at the rate of 10 per cent on dividend above Rs. 10 lakh and the hike in securities transaction tax from 0.017 per cent to 0.05 per cent on sale of an option in securities where option is not exercised, is not that alarming.
European shares retreated from a three-week high on Monday and were on track for their third straight month of losses after a weekend meeting of the G20 group of leading economies failed to strike new measures to boost growth.
The pan-European FTSEurofirst 300 index was down 1 per cent. It has fallen more than 4 per cent this month.
Asian stocks were off to a cautious start on Monday after a week-end meeting of the Group of 20 economic policymakers ended with no new coordinated action to spur global growth and as solid US data revived expectations of a US rate hike before year-end.
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