MUMBAI: BSE Sensex touched the 40,000 mark on Friday only briefly, and the exuberance witnessed on the exit day of general elections in May was completely missing as the Finance Minister read out the Union Budget. Markets were upset about lack of immediately apparent growth boosters, and there was an overhang of 3-7 per cent taxation on High Networth Individuals and increasing of public shareholding limit in listed companies. As a result, Sensex closed 1 per cent or 395 points down at 39,513 and Nifty was down 136 points at 11,811.
Six out of the 30-share index ended in green, dominated by banks like IndusInd, Kotak, ICICI and State Bank, as well as ITC and Bharti Airtel. The fall was across the market, and the only sectoral indices that stayed flat were Bankex, FMCG and telecom.
Government, instead of leaving money in the hands of consumers to bolster economy, has decided to spend more by bringing in funds through more taxes, said Motilal Oswal, MD, MOFSL. “Markets will trade a little weak in the near future; government does not show the roadmap for growth and execution of the same. If markets weaken in the near future, it will be an opportunity to increase equity exposure as long term looks promising,” he said.
The increasing of public shareholding limit in listed companies from mandatory the 25 per cent to 35 per cent is a worry to market players as the liquidity improves in a stock, valuation could go down.“Out of BSE 500 stocks, which represents about 90% of India’s listed markets; 167 companies will be asked to dilute promoters’ stake to 65% from 75% currently, amounting to Rs 3.70 lakh crore,” Deven Choksey, MD, K R Choksey, said.
This will be a big overhand on stock prices and the market is going to keenly watch the timelines for its implementation. Some even fear MNCs delisting instead of selling additional stake to stay listed.
No tax relief for markets
There was no big taxation relief for markets, except for a small tweak in Securities Transaction Tax. Investors have been given tax relief akin to ELSS as government hiked target to I1.05 lakh crore in the current fiscal.