While the stock market soared merrily after the Budget speech taking the Sensex beyond the psychologically important 28,000-mark and the Nifty above 8,700, the day after, the mood is much more sombre. The Sensex and the Nifty are diving in to the red as market participants realise that the Budget did not hold much for them.
Budget day rally
Stocks treaded sideways while Arun Jaitley read his Budget Speech, nervously awaiting some unfavourable taxes on investments. But there was a sharp jump in stock prices after the speech, mainly driven by the relief that the Finance Minister had not touched the favourable long-term capital gains tax rules for equities.
Fear had set in among Indian investors about the FM extending the holding period for claiming long term capital gains on equity investments to 3 years, in line with debt instruments, after the Prime Minister Narendra Modi’s speech on New Year eve where he took a pot shot at the favourable treatment being meted out to equity investors.
Many market watchers might have misinterpreted yesterday’s relief rally to mean that there was a bonanza for equity investors in the Budget. But that’s not true. Corporate tax rated were moved down to 25 per cent only for companies with turnover less than Rs 50 crore, leaving almost all listed companies out of the ambit of this proposal. There wasn’t too much direct benefit for sectors save few such as road construction companies, cement, capital goods manufacturers catering to railways and some agri input companies.
Foreign investors weren’t given a reprieve from GAAR either. The changes in the taxability for indirect transfer of shares by FPIs applies only to players in category I and II.
The day after
It’s therefore not surprising that stocks are now drooping. The list of gainers in the Sensex too shows that market participants are rather confused about the implications of the Budget. Bharti Airtel is the top gainer, up over 2 per cent followed by NTPC and Infosys. Market players probably hope that Bharti will benefit by the Centre’s push towards digital India, connecting all villages. Rural electrification push seems to have fired NTPC too. Rest of the Sensex pack are languishing.
The gainers in the broader market are also a mixed bag with Tata Communication, Godrej Industries and Cummins India leading the gainers’ list.
With the Budget now behind, attention will revert to third quarter earnings and the speed with which the country returns to normalcy post demonetisation.