Sensex: ₹3.46 lakh crore investor wealth wiped off

The Sensex logged one of its biggest plunges on Saturday (February 1) after the Union Budget failed to live up to market expectations of growth-boosting measures and fiscal discipline.

The benchmarks, which started on a shaky note, tanked soon after Finance Minister Nirmala Sitharaman pegged the fiscal deficit at 3.8% for the current fiscal, compared to the earlier target of 3.3% of GDP.

Presenting the Union Budget for 2020-21 in Parliament, Sitharaman also proposed lower income tax slabs for those foregoing various exemptions, and removed dividend distribution tax on companies, effectively shifting the tax burden to the recipients.

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Nosediving nearly 1,275 points from the day’s high, the 30-share BSE Sensex ended 987.96 points or 2.43% lower at 39,735.53.

This was the benchmark’s biggest drop since October 24, 2008, when it had plummeted 1,070.63 points, and the fourth biggest fall overall.

On similar lines, the 50-share NSE Nifty plunged 300.25 points or 2.51% to close at 11,661.85.

Investor wealth, measured in terms of value of all listed shares on BSE, plunged by Rs 3,46,256.76 crore to reach ₹1,53,04,724.97 crore.

Since the last Budget presentation in July 2019, the Sensex has gained 222.14 points or 0.56%, while the Nifty slumped 149.30 points or 1.26%.

Analysts said income tax slab rejigs stoked fears of declining inflows in tax-saving investment avenues, while the proposed transfer of dividend distribution tax to investors added to the negative sentiment.

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“The lack of major growth boosting measures in itself is negative for the equity market. The new income tax regime would also be negative for tax exempt equity savings schemes. Recasting of dividend taxation norms also seem to be on the balance negative for most domestic equity investors. Overall, the budget seems to be negative for the equity market,” said Sujan Hajra, chief economist and executive director, Anand Rathi, Shares & Stock Brokers.

ITC was the top laggard in the Sensex pack, tanking 6.97%, after the Budget hiked the excise duty on cigarettes. L&T, HDFC, SBI, ONGC, ICICI Bank and IndusInd Bank also lost up to 5.98%.

On the other hand, TCS rallied 4.13%, followed by HUL, Nestle India, Tech Mahindra and Infosys.

In her second Budget presentation, the finance minister said certain government securities will be open for foreign investors, adding that the Centre plans to increase investment limit for FPIs incorporate bonds from 9% to 15%.

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Abhinav Gupta, President, Capital Market, Share India Securities, said, “We are extremely disappointed with budget. No significant announcement for industry or consumers. Namesake changes in income tax slabs only to create political mileage that may not lead to any significant changes in growth prospects in the near term. The FM could have made several key initiatives to spur investment and domestic consumption to address the pain points of the economy. While this budget could have focused on capital creation for nationals as well.”