The benchmark Sensex fell as much as 463 points to 35,502 in a knee-jerk reaction to the announcement. It recouped most of the losses to end at 35,907, down 58.4 points, or 0.16 per cent. On the NSE, the Nifty50 index closed at 11,017, down 10.8 points, or 0.1 per cent. The Sensex gyrated between gains and losses 18 times. The volatility gauge India VIX index dipped 11.4 per cent to 14.11.
Although the imposition of LTCG tax, along with the securities transaction tax (STT), is seen as a negative, the market took the news in the stride due the manner of implementation, said experts. The Centre has provided for grandfathering on acquisitions prior to January 31. Also, the tax rate has been kept relatively low at 10 per cent, which helped the sentiment, experts added.
Foreign portfolio investors (FPIs) on Thursday purchased shares worth ~11 billion, while the domestic counterparts sold shares worth Rs 3.6 billion. Year-to-date, FPIs have net bought shares worth Rs 130 billion, against purchases of Rs 4 billion by the domestic institutional investors.
According to market players, the impact of LTCG on FPIs could be negative, particularly on those pooling vehicles.
Experts say the fiscal deficit estimates also provided some comfort. The government has revised the fiscal deficit target for FY19 to 3.3 per cent of gross domestic product, against the earlier 3 per cent.
“The fiscal deficit target has only been slightly compromised. While there has been marginal tweaking of the long-term capital gains tax and no tax benefits for listed companies, the salaried class, senior citizens and small businesses have benefitted,” said Navneet Munot, executive director & chief information officer, SBI Mutual Fund.
The Budget unveiled initiatives for the rural sector, including linking of minimum support price to production cost and increasing agricultural credit to ~11 trillion. Shares of companies focused on agriculture surged by up to 10 per cent intra-day. Capital goods and the FMCG stocks were the other beneficiaries.
“The Budget is a pragmatic blend of fiscal prudence, social security, rural upliftment and infrastructure creation, which should go a long way towards achieving inclusive growth,” said Shilpa Kumar, MD and CEO, ICICI Securities.
“Signals are in the favour of index consolidation, while profit-taking may continue on the broader front. We reiterate our bullish yet cautious stance and suggest preferring index majors for trading,” said Jayant Manglik, president, Religare Broking.