Sensex sinks 988 points; Rs 3.46 lakh cr investor wealth wiped off

ITC was the top laggard in the Sensex pack, tanking 6.97 per cent, followed by L&T, HDFC, SBI, ONGC, ICICI Bank and IndusInd Bank.

The Sensex logged its biggest single-day plunge in more than a decade on Saturday 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 per cent for the current fiscal, compared to the earlier target of 3.3 per cent 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.

Nosediving nearly 1,275 points from the day's high, the 30-share BSE Sensex ended 987.96 points or 2.43 per cent 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 per cent 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 Rs 1,53,04,724.97 crore.

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

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.

"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 per cent, 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 per cent.

On the other hand, TCS rallied 4.13 per cent, 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 in corporate bonds from 9 per cent to 15 per cent.

Abhinav Gupta, president, Capital Market, Share India Securities, said, "We are extremely disappointed with budget. No significant announcement for industry or consumers.

“Name sake changes in income tax slabs only to create political mileage that may not lead to any significant changes in growth prospects in near term.

"The FM could have made several key initiatives to spur investment and domestic consumption to address the pain points of the economy.

“This budget could have focused on capital creation for nationals as well."

Sectorally, BSE realty index plunged 7.82 per cent, followed by capital goods, industrials, finance, bankex and metal.

IT and teck ended with gains of up to 1.41 per cent.

"DDT removal is good as it increases dividends received in the hands of the taxpayer. However, such receipts now are taxable in their hands.

“Those above 20 per cent tax slab will now face more tax on their dividend income," said Archit Gupta, founder, and CEO, ClearTax.

Photograph: Shailesh Andrade/Reuters