The Hindu Business Line : Market spooked

Mumbai, July 6 Equities fell like a pack of cards on Budget day, even as many analysts said the intense disappointment in the marketplace was misplaced and came from unreasonable expectations.

The Sensex lost 869 points on Monday, to close at 14,043 while the broader Nifty tanked 259 points to close at 4165.

The Sensex actually opened in the green at 14,962, up 49 points. The index was above the 15,000-mark as the Finance Minister began his speech, but as the budgetary proposals relating to the farm sector commenced (at around 11.25 a.m.), it slipped into the red.

Thereafter, there was no stopping, and in another hour the Sensex had plunged by around 500 points.

The market does not seem to have understood the Budget well, said Mr Deepak Parekh, Chairman, HDFC: “It is overall a good, development-oriented Budget with emphasis on infrastructure, rural employment, health and education.”

At close of trade, the Sensex and the Nifty had fallen 5.8 per cent each. The Sensex’s intra-day fall exceeded 1,000 points.

“Since the Budget did not have a big-bang announcement like reduction in income-tax, corporate tax or dividend distribution tax, or scrapping of STT, operators sold out their positions,” Mr Vallabh Bhanshali, Chairman, Enam Securities Pvt Ltd.

The Budget is silent on the timeline for tackling the fiscal deficit position, and the reforms which would have aided in handling the fiscal situation of the government,” the Angel Broking CMD, Mr Dinesh Thakkar, said. (Last year too the stock markets had reacted strongly to the Budget announcements and the Sensex fell 566 points intra-day, finally closing down by 246 points.)

FIIs were net sellers of equities for Rs 1,483 crore on Monday, according to the provisional data provided by the exchanges. Domestic institutional investors were net buyers for Rs 816 crore.

“Clearly, this is a Budget from a government that has five years in which to build a strong economy; investors who are looking at a three- to five-year time frame for their investments might find the opportunity that the market is currently presenting, interesting,” said Ms Madhabi Puri Buch, MD & CEO, ICICI Securities.

The BSE sectoral indices for Bank, Realty, Capital Goods, Metal, Power and Oil & Gas were the worst performers, dipping between 5 per cent and 8 per cent.

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