It was a volatile day for the equity markets. They opened strong ahead of the Budget but saw a knee-jerk fall during the afternoon session when the Finance Minister announced the introduction of long- term capital gains (LTCG) tax.
While the markets managed to recover most of the losses, it ended the day in the red as investor sentiment was dampened as LTCG was brought in even as no changes were made in the securities transaction tax rates. The 30-share Sensex, which was trading mostly in the green, fell 460 points around 12:40 p.m. when the announcement related to LTCG was made. It touched a low of 35,501.74 before some amount of buying support lifted the index.
The Sensex ended the day at 35,906.66, down 58.36 points or 0.16%. The volatility can be gauged from the fact that the index gyrated in a range of more than 750 points during the day. The broader Nifty of the National Stock Exchange (NSE) ended at 11,016.90, down 10.80 points or 0.10%.
Rajat Jain, chief investment officer, Principal Mutual Fund, said that LTCG tax would have an impact on the market. Yet, he reckoned that the investors would still look at equity investment considering the historical return of the stock market. “While it (LTCG) will have a sentimental impact, the fact the gains till Wednesday are protected is a positive,” said Mr.Jain. Investors would adjust to the new tax regime and decide their asset allocation keeping in mind that equity investments had yielded good returns over the long-term, he added.
Interestingly, sector-specific announcements saw many mid- and small-cap stocks gaining ground even as the overall market breadth remained slightly negative. On the BSE, 1,463 stocks lost ground, as against 1,311 gainers.
Companies from the farm sector saw their shares gain ground after the Centre proposed raising institutional credit for agriculture to ₹ 11 lakh crore for 2018-19 apart from a higher minimum support price for crops. Bayer Corpscience, PI Industries, Monsanto India and Coromandel Agro Products & Oils ended the day in the green.
