India’s budget pours cold water on capital market

February 29th, 2008 - 7:45 pm ICT by admin  

A file-photo of P. Chidambaram

Mumbai, Feb 29 (IANS) India’s national budget dampened hopes of investors, with key market indices ending the day with losses even as Finance Minister P. Chidambaram hiked tax on short-term capital gains but left corporate taxes and securities transactions tax (STT) unchanged. Moreover, the finance minister’s announcement that the government will consider ways to manage capital inflow into the markets was not well received by the secondary markets.

The 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE) opened at 17,779.54 points and notched a high of 17,779.54 before closing at 17,578.72 points.

It lost 245.76 points or 1.38 percent at the day’s close.

The broader 50-share S&P CNX Nifty index on the National Stock Exchange (NSE), which opened at 5,285.00 points, closed at 5,223.50 after touching the day’s high at 5,290.80 points.

At close, it registered a fall of 61.60 points or 1.17 percent.

The market, which started the day in the negative zone on weak global cues and budget apprehensions, continued the downward slide. At one point the benchmark index lost nearly 500 points.

However, following clarity on the impact of the farm loan waiver on the banking industry, markets managed to partly recover, riding on banking stocks in the final trading session.

Leaving aside automobile and gems and jewellery, most other sectors received no significant benefits, which, according to market analysts, may have adverse effects on the already volatile Sensex in coming few weeks.

Explaining the long-term impact, S.P. Tulsian, head of SPTulsian.Com, said: “Overall, it is a negative budget for the capital markets. Chidambaram has gone in for a populist move. The hike in capital gains tax, unchanged corporate tax and STT will heavily affect the sentiments of the market.”

The BSE Midcap index, which closed at 7,680.39 points, went down 31.37 points or 0.41 percent.

The BSE Smallcap index, which closed at 9,628.13 points, went down 40 points or 0.41 percent.

On BSE, the market breadth was negative with low trading volumes. A total of 1,067 shares advanced, 1,630 shares declined and 46 shares remained unchanged.

Asian and European markets also closed in the red Friday.

The top gainers of the day at BSE included State Bank of India at Rs.2,109.70, up 3.48 percent, CMC Ltd at Rs.924.80, up 8.24 percent, GlaxoSmithKline at Rs.1,109.40, up 4.52 percent, Maruti Suzuki at Rs.867.20, up 32.25 percent, and Aventis Pharma at Rs.942.30, up 3.29 percent.

The top losers of the day at BSE were Seimens Ltd at Rs.816.70, down 52.32 percent, Reliance Capital at Rs.1818.25, down 4.46 percent, Infosys at Rs.1,546.85, down 3.29 percent and Titan Industries at Rs.1,097.60, down 3.42 percent.

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