Budget 2021

Sensex down by 988 points, Nifty below 11,700 on Union Budget day

People look at the screen displaying the Sensex results on the facade of BSE building in Mumbai on February 1, 2020.   | Photo Credit: Reuters

If the stock market reaction is anything to go by, then the Union Budget 2020-21 has certainly not lived up to its expectations. The benchmark Sensex nosedived nearly 1,100 points during intra-day trades as market participants felt that the government has not taken concrete steps to revive the slowing economy.

The 30-share Sensex, which was trading around 100 points higher before the finance minister began her speech, erased all its gains and dipped in the red even as the budget proposed removal of dividend distribution tax (DDT) for companies and lower income tax regime for individuals who forego the existing exemptions.

At the fag end of the trading session, the Sensex fell below the psychological level to 40,000 to touch a low of 39,631.24, a fall of 1,092.25 points. The barometer settled the day at 39,735.53, shedding 987.96 points or 2.43%.

The broader Nifty ended the day at 11,661.85, down 300.25 points or 2.51%.

“Market expectations were high on capital market reforms which have not materialised and to that extent there could be some near term disappointment,” said Jaideep Hansraj, Managing Director & Chief Executive Officer, Kotak Securities.

While the biggest loser among the Sensex pack was ITC, which lost nearly 7%, financials witnessed across the board selling with heavyweights like HDFC, State Bank of India, ICICI Bank, Axis Bank and HDFC Bank all losing significant ground on Saturday.

Interestingly, stocks of listed insurance entities lost heavy ground as market was abuzz with talks that the new income tax regime that individuals can opt for by foregoing the existing deductions could impact the sales of insurance products that are typically taken for tax saving purposes.

While the shares of ICICI Prudential Life lost nearly 11%, SBI Life Insurance was down a little over 10%. Even HDFC Life Insurance Life ended the day 6% lower.

“Though the abolition of dividend distribution tax (DDT) looks like a positive from this budget, it still addresses only the supply side and not the demand side,” said Dharmesh Kant, Head - Retail Research, India Nivesh.

“There is little or rather nothing in the budget which can boost consumption. The markets which were already reeling under the pressure of the coronavirus attack will further sink owing to an insipid budget,” he added.

More importantly, foreign portfolio investors (FPIs) for whom the government has increased the investment limit in corporate bonds were net sellers in equities on Saturday at nearly Rs.1,200 crore.

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Printable version | Jan 23, 2022 3:46:54 PM | https://www.thehindu.com/business/budget/union-budget-2020-sensex-closing-on-february-1-2020/article30712050.ece

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