Bloodbath on bourses

Hyderabad: Halting an eight-week upward trek, stocks on the domestic bourses tumbled on Friday as investors negatively reacted to the long-term capital gains tax imposed by Finance Minister Arun Jaitley in Budget 2018-19. As a result, the market benchmark Sensex nosedived 840 points, its biggest single-day slump since August 24, 2015. 

The 30-share index while the broader NSE Nifty tanked over 250 points to finish below the 10,800-mark. The bloodbath on the bourses has resulted in wealth erosion of Rs5 lakh crore for investors. The Budget proposals on taxing equities torpedoed investor sentiment. 

The combined market capitalisation of all companies listed on the BSE fell by Rs 4.7 lakh crore to Rs 148.54 lakh crore, from just Rs 153.1 lakh crore previously, as bears took charge on the markets. 2,548 stocks on BSE declined and 295 moved up, while 118 remain unchanged.

According to the Budget proposal, investors will also have to cough up 10 per cent tax on distributed income from equity-oriented mutual funds (MFs) as well. Finance Minister Arun Jaitley also projected a fiscal deficit of 3.5 per cent of GDP for the current fiscal against the earlier target of 3.2 per cent. 

Market mood suffered another setback on Friday after Fitch Ratings said the high debt burden of the government constrains India's rating upgrade.  The flagship Sensex crashed 839.91 points, or 2.34 per cent, to end the day at 35,066.75 as jittery investors slashed their portfolios. Sensex tanked 1,624.51 points on August 24, 2015. The broader NSE Nifty slipped below the 10,800-mark by tanking 256.30 points, or 2.33 per cent, to 10,760.60 at close. Intra-day, it hit a low of 10,736.10. 

Key indices recorded upward movement for previous eight weeks continuously. However, the latest market crash halted this winning streak. On a weekly basis, the Sensex declined 983.69 points, or 2.72 per cent, while the Nifty fell 309.05 points, or 2.79 per cent. 

“Volatility in bonds and rupee over fiscal slippage and stocks’ churn ahead of FY19 over LTCG prompted sharp pull back in stocks. Uncertainties over the execution of spendthrift budget without tampering fiscal deficit target have fuelled the current volatility and may compel the RBI to take a more hawkish stance in the upcoming monetary policy meeting,” said Anand James, Chief Market Strategist, Geojit Financial Services. 

Barring Shanghai, Asian indices closed in red, while European stocks were trading weaker in early session. However, market analysts consider the correction as healthy, while citing the reason of long-term bull run.  Brokers said that there was a lot of froth in the market. Small and midcaps were trading at very high valuations. 

We observed that the selling started a week ago before the Budget. So, a lot of correction took place already. Otherwise, it would have been a major market crash, said an analyst, who further forecasts that this capitulation may continue on Monday.