The railway budget, seen as uninspiring by market players, coupled with profit-booking, sparked a huge sell-off on Dalal Street on Tuesday, eroding over Rs 3 lakh crore in investor wealth. Investors dumped shares in the power, real estate and infrastructure sectors, which had seen steep gains in recent weeks on hopes of favourable Union Budget announcements. The worry that the government, which has to battle a difficult fiscal situation, might disappoint in the Union Budget also spooked investors. “If the railway budget is any indication, it is likely the Union Budget will be long on intention and short on action. That is what the market is worried about,” said Dalton Capital Managing Director U R Bhat. The expenditure announced in the railway budget was much lower than the market hoped for, triggering concerns the government would slash spending. (HALTED IN THEIR TRACKS) The 30-share BSE Sensex dropped 518 points, or 1.98 per cent, from its previous close to end the day at 25,852.11. The National Stock Exchange’s Nifty declined 163.95 points, or 2.11 per cent, to 7,623.2. In percentage terms, both indices fell the most since January 27; in terms of points, the fall was the steepest since September last year. The broader markets saw a sharper correction, with the BSE mid-cap index dropping 3.63 per cent and the BSE small-cap index sliding 4.19 per cent. Brokers said investors chose to take money off the table following spectacular gains since the election results. Heavy selling was seen in sectors like realty, power, capital goods and metals. BSE’s realty and power indices fell the most — over six per cent each — followed by the metal and capital goods indices, which declined more than four per cent each. The decline for the BSE FMCG index was the lowest, at 0.5 per cent.
Slashing of expenditure by the government, the biggest spender in the economy, could hurt companies in sectors like capital goods, market players felt. Among Sensex stocks, BHEL crashed the most, at 8.2 per cent, followed by NTPC and Tata Power, which dropped five per cent each. Analysts said the market had been a little too optimistic about the new government and its growth-reform agenda. The expectations had run too high, leaving room for disappointment. “People expect the government to do everything in one shot. They will now have to start being more considerate… Given the state of the economy and the finance, the government cannot do much more than this,” said Bhat. Interestingly, foreign institutional investors bought shares worth Rs 422 crore in the cash segment, while domestic investors sold shares Rs 400 crore worth of shares. Weakness in the global markets added to the subdued sentiment. Most foreign markets closed with losses on Tuesday, even as the fall was not as sharp as in the domestic market. Experts said stocks could continue to remain under pressure following the rail budget disappointment. “There could be some more pain left in the market in the near term. But buy-at-declines should be the strategy,” said Amisha Vora, joint managing director, Prabhudas Lilladhar. “Other than a vague hope, there are few uniform ‘expectations’, given that no one knows what the government is working on. This means even a large-scale disappointment is unlikely. We expect the Budget to be a non-event for the broader market,” Neelkanth Mishra, India Equity Strategist at Credit Suisse, had earlier said in a note titled ‘Union Budget: Too soon to expect fireworks?