Even though there were several measures announced in the Union Budget presented to Parliament to revamp the financial markets, the stock markets dwindled on Thursday.
The benchmark Bombay Stock Exchange (BSE) 30-share Sensitive Index (BSE) dipped by 290.87 points or 1.52 per cent to close at 18861.54 points. On the National Stock Exchange (NSE), the 50-share Nifty closed at 5693.05 points with a loss of 103.85 points or 1.79 per cent.
The BSE mid cap index crashed by 2.46 per cent while small cap index closed down by 1.97 per cent.
Among the broad based index, BSE 100 was down by 1.89 per cent, BSE 200 by 1.90 per cent and BSE 500 1.87 per cent.
The fall was led by power stocks which dipped 4.29 per cent followed by banks, capital goods, metal , PSUs and realty.
“Lack of big bang reforms and specific measures to address the current issues seem to have weighed on market sentiment and leading indices lost ground,” said K. N. Sivasubramaniam , CIO, Equity, Franklin Templeton Mutual Fund. “The hike in exemption limits and increased rural spending gave a boost to FMCG stocks.”
Despite a hike in excise duties, auto stocks closed in the positive territory. Indications that the Reserve Bank of India will announce guidelines for issuing banking licences to private sector players boosted NBFC stocks.
Among FMCG stocks, ITC was trading firm as duty hike on cigarettes was lower than market expectations.
The reduction in Securities Transaction Tax (STT) is a positive for brokerages. Lack of new policy initiatives alongside an increase in dividend and corporate surcharge led equity markets to reverse early gains and close in the red.
The corporate surcharge is expected to bring down earnings estimates slightly, according to Franklin Templeton. Power, banking and capital goods stocks were the top losers due to lack of major announcements to spur investment.
The Budget proposes 15 per cent deduction for companies investing Rs. 100 crore or more on plant and machinery in 2013-15.
To augment finances for infrastructure, the Budget provides for up to Rs. 50,000 crore tax free infrastructure bonds and encourages setting up of infrastructure development funds.
The Budget reiterated the need to adopt a pooled pricing policy for coal and proposed a joint public-private effort to reduce dependence on imported coal.
“The reduction in securities transaction tax is a positive for brokerages. The additional surcharge on high income individuals and a hike in duties of luxury items are unlikely to have a significant impact on consumption.