Budget hit: Rs 5 lakh crore equity investors’ wealth wiped out in 2 days
After falling around 1 per cent on Friday, BSE Sensex cracked another 1.50 per cent.
BSE Sensex closed 792.82 points or 2.01 per cent lower at 38,720.57 while NSE Nifty ended at 11,564, down 247.15 points or 2.09 per cent.
In the 30-pack Sensex, three stocks ended in the green and 27 in the red with Bajaj Finance as the worst performer and YES Bank best. ONGC, NTPC, Hero MotoCorp and Maruti Suzuki too joined Bajaj Finance on the losers list, slipping up to 8 per cent.
“There was nothing in the Budget and the market was okay with that. However, long-term capital gain tax has increased for FPIs, because of a few tweaks, which is one thing that market did not like. Buyback tax and the plan to increase in public shareholdings after few years are a few other reasons which hit the market badly,” said AK Prabhakar, Head of Research, IDBI Capital Markets.
The Budget proposal to raise income-tax surcharge on the ultra-rich could also affect about 2,000 foreign funds, which are structured either as trusts or association of persons, or AOPs, a class of income earners required to pay more taxes after new liability slabs were created in the Budget.
Index heavyweights HDFC Bank, L&T, ICICI Bank, SBI, Bajaj Finance, Kotak Mahindra Bank and Axis Bank together wiped out around 400 points from the Sensex during the first half on Monday.
The selloff was so severe that companies like Hero MotoCorp, PNB, Indian Oil Corporation and Dilip Buildcon witnessed their biggest fall of the year, whereas Bajaj Finance and Bank of India saw their second biggest fall in a year.
“Measures to revive the growth were missing in the Union Budget which mainly dented market sentiment,” said Umesh Mehta, Head of Research, SAMCO Securities.
“Overall, valuation of largecaps and slowdown in the auto sector, which is a big part in manufacturing GDP, were among factors putting pressure on the market. Going forward, we may also see some selling by foreign institutional investors (FIIs) because there is a risk aversion as indicated by rising gold prices. This may impact FII-heavy stocks,” Mehta said.
In the broader market, selling was severe in smallcaps, and the BSE Smallcap index traded over 2 per cent down in late morning trade, while BSE Midcap index fell over 1.47 per cent.
On BSE, KRBL (down 12 per cent), Mindtree (down 11 per cent), PNB (down 10.50 per cent), JP Associates (down 9.70 per cent) and Bank of India (down 7.51 per cent) were among the top losers, while Yes Bank, Dr Lal Path Labs, PC Jeweller, HCL Technologies and Reliance Communications were among the top gainers.
Sandip Sabharwal, an independent market expert, believes subdued global cues mainly dented market sentiment in India. However, midcaps and smallcaps are looking cheap. He believes the second-rung stocks will outperform once the dust settles on Dalal Street. “Select NBFCs, which have strong parentage, and auto ancillaries are looking good at present,” Sabharwal said.
Elsewhere in Asia, Shanghai Composite Index plunged 2.31 per cent on Monday after a strong rebound in US job growth in June dashed hopes of an aggressive interest rate cut by the Federal Reserve later this month. Hang Seng fell 1.80 per cent, Nikkei 0.99 per cent and Kospi 2 per cent.
On the currency front, the rupee depreciated 25 paise to 68.66 against the US dollar.
US market closed in the red on Friday. The Dow Jones Industrial Average fell 43.88 points, or 0.16 per cent to 26,922. The S&P 500 also inched lower to 2990.41. down 0.18 per cent the previous close.