Nifty ends below 7,000 as global cues override Budget benefits

Losses in IT majors contributed the most to the decline in the benchmark indices along with ONGC which slumped 10%

Markets ended lower on Monday amid a volatile trading session after weak global cues offset a Budget that maintained the path to fiscal prudence and growth while higher allocations to the rural sector sought to boost incomes of the poor and the underpriviledged.

The S&P BSE Sensex ended down 152 points at 23,002 and the Nifty50 ended down 43 points at 6,987. In the broader market, the BSE Midcap and Smallcap index ended flat. Market breadth ended negative with 1,391 losers and 1090 gainers.

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“Union Budget 2016 has struck a fine balance between fiscal prudence and providing growth boosters to the economy. The Budget is leaning more towards rural consumption, which in light of consecutive bad monsoons steps will bolster the India consumption story which is reliant on rural consumption. As expected, the Budget has laid emphasis on infrastructure especially roads, it is also about higher taxation for the elite class and effective utilization of the same proceeds towards the growth and development story of India," says Kamlesh Rao, CEO, Kotak Securities.

BUDGET HIGHLIGHTS

The Budget has allocated Rs 25,000 crore towards their recapitalisation of state-owned banks in the next fiscal.

Infrastructure outlay is at Rs 2.21 lakh crore for 2016-17 with road and rail taking up most of the allocation at Rs 2.18 lakh crore.

In an effort to boost farmers income the Budget has proposed allocation of nearly Rs 36,000 crore for the farm sector while raising agri-credit target to Rs 9 lakh crore next fiscal.

An additional 1% tax on luxury cars above Rs 10 lakh was imposed in the Union Budget today. The Budget also imposed an additional infrastructure cess of 1% on small petrol cars and a 2.5% cess on diesel cars.

Anil Chopra - Group CEO & Director, Bajaj Capital adds,“Union Budget is an annual exercise with the main objective of giving a direction to country's economy.  This year's Budget tabled today in the Parliament has cheered middle classes or the common man with quite a few announcements. Every taxpayer whose annual income is below Rs.5 lacs will get an additional tax rebate of Rs.3,000 U/s 87A.  In the last Budget, this marginal relief was announced and the amount was restricted to Rs.2,000 per individual.  Now this rebate has been enhanced to Rs.5,000/-  This rebate is available to all taxpayers whether salaried or business or self-employed."  

The tobacco industry has always been a revenue generator with increase in excise duties. Excise duties on various tobacco products other than beedi have been raised by about 10%-15%.

Telecom companies will have to cough up more in taxes as transfer of air waves will be declared a service. Spectrum or air waves have now been identified as a "tangible asset" and as a result a service tax of 14.5% will be levied on all spectrum acquired through auctions or from other players.

The FM has made Employee Provident Fund (EFP) and National Pension Scheme (NPS) withdrawals on retirement partially taxable. This essentially means when you withdraw from EPF, the 60 per cent of the corpus will attract tax and the remaining 40 per cent will not. In case of NPS, 60 per cent of the corpus will be taxed and the remaining 40 per cent will need to be put in an annuity fund.

The Budget has imposed 10% tax on dividend for those individuals whose dividend income exceeds Rs 10 lakhs.

The tax exemption for house rent allowance has been raised to Rs 60,000 from the current Rs 24,000-level.
IMPACT ON STOCKS

The major draggers of the benchmark indices were IT exporters with losses in Infosys and TCS contributing the most to the decline. Infosys ended down 3.3% while TCS closed 1.5% lower and Wipro fell 2.2%.

State-owned oil exploration major was the top Sensex loser which ended nearly 10% lower.

Passenger car major Maruti Suzuki ended nearly 5% lower after the Budget proposed to levy an infrastructure cess of 1% on small petrol, LPG, CNG cars, 2.5% on diesel cars of certain capacity and 4% on other higher engine capacity vehicles and SUVs. Among others, Tata Motors eased 0.7% while Bajaj Auto and Hero MotoCorp ended down 1.6%-2.2% each.

Larsen Toubro eased nearly 3% despite a higher infrastructure outlay while BHEL ended down 4.2%. In the roads sector, IRB Infrastructure ended up 1.4%.

Other Sensex losers include, Hindustan Unilever and Sun Pharma among others.

Despite increase in excise duty ITC rebounded from intra-day lows to end 1.7% higher.

PSU bank shares ended mixed after allocation of Rs 25,000 crore towards recapitalisation. SBI ended up 1.4% while Bank of Baroda, Punjab National Bank ended lower. Private banks also ended mixed with ICICI Bank and HDFC Bank gaining 1.3%-2.8% each while Axis Bank ended down 2.8%.

Other gainers include, Reliance Industries, Lupin and Dr Reddy's Labs among others.

GLOBAL MARKETS

Asian stocks ended lower with Chinese shares falling the most. The People's Bank of China (PBoC) set the yuan at 6.5452 to USD 1.0, down 0.17 percent from Friday, as per the China Foreign Exchange Trade System. The benchmark Shanghai Composite ended down 3%, Hang Seng eased 1.3% and Japan's Nikkei ended down 1%.

European shares edged lower after the meeting of the leaders of the G20 group of industrialised nations did not announce any plans to boost economic growth. The CAC-40, DAX and FTSE-100 were down 0.6%-1% each.