The market gave the Interim Budget a big thumbs-down, the general consensus being that Finance Minister Pranab Mukherjee had delivered a damp squib.
The Bombay Stock Exchange Sensitive Index, or Sensex, dropped the most in two weeks after the Budget failed to deliver investor expectations of a stimulus plan for sectors such as automobiles and real estate.
The Sensex fell 329 points, or 3.4 per cent, to 9,305.45, the biggest decline since February 2. The S&P CNX Nifty Index on the National Stock Exchange dropped 3.4 per cent to 2,848.50. The BSE 200 Index declined 3.3 per cent to 1,095.87.
There was selling pressure across all sectors, including realty and auto, which saw some early-morning buying. Energy, metal and stocks of government-owned firms also fell sharply.
Edelweiss Chairman Rashesh Shah said there were expectations that the government would use the opportunity to provide some more stimulus for the economy, with specific expectation of tax exemptions for the housing and automobile sectors.
Others, however, felt the markets would get over the disappointment soon. “It’s back to global news flows and stock market trends,” said Dinesh Thakkar, chairman and managing director, Angel Broking.
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The Sensex today also mirrored the fall in Asian stocks, as Japan’s economy shrank the most since 1974 and Group of Seven finance chiefs said the economic slowdown will persist through most of 2009.
The MSCI Asia Pacific Index declined 0.6 per cent to 81.26 in Tokyo. The Nikkei 225 fell 0.4 per cent and Hang Seng declined 0.7 per cent. Futures on the US Standard & Poor’s 500 Index dropped 0.6 per cent. US markets are closed today for Presidents’ Day.
DLF fell 2.4 per cent after the government did not propose new measures to revive housing demand. Indiabulls Real Estate fell 9.4 per cent and Unitech dropped 5 per cent.
Banking stocks, led by State Bank of India and ICICI Bank, the largest and second-largest lenders respectively, also saw sharp falls of 4.9 and 5.9 per cent.