Carnage on D-Street: Sensex loses 950 pts, Nifty below 11,650

Key benchmark indices plunged in a special trading session on Saturday, as Union Budget announcements failed to lift investor sentiment. Lack of sectoral perks, confusion regarding income tax slabs and no tweaks in long-term capital gains (LTCG) tax led to a carnage in share prices. The Nifty broke both the crucial 100 and 200 days simple moving averages placed at 11,822.19 and 11,655.03 respectively.

The barometer BSE S&P Sensex plunged 987.96 points or 2.43% to 39,735.53, as per the provisional closing data. The Nifty 50 index plummeted 318.30 points or 2.66% to 11,643.80, as per the provisional closing data.

Selling was wide spread. The S&P BSE Mid-Cap index lost 2.21% while the S&P BSE Small-Cap index slipped 2.2%.

There were more sellers than buyers. On the BSE, 618 shares rose and 1719 shares fell. A total of 124 shares were unchanged. In Nifty 50 index, 7 stocks advanced while 43 stocks declined.

Union Budget 2020:

FM Sitharaman informed Parliament during Budget presentation that India's fiscal deficit is now pegged at 3.8% for FY20 and 3.5% in 2021. Nominal GDP growth for FY21 revised to 10%. Central government's debt has come down to 48.7% in March 2019 from 52.2% in March 2014. Sitharaman said that national security is the government's top priority.

FM retained LTCG tax on equity mutual funds in the Union Budget. Most mutual fund investors were hoping for removal of LTCG tax on equity mutual funds.

FM said that the government is proposing to sell a part of its holding in Life Insurance Corporation of India (LIC) by initial public offer.

FM proposed a new income tax regime. As per the new regime, no tax exemptions will be available but the income between Rs 5 lakh and Rs 7.5 lakh will be taxed at 10% down from current 20%, income between Rs 7.5 lakh and Rs 10 lakh will be taxed at 15% down from current 20%, and income between Rs 10 lakh and Rs 12.5 lakh will be taxed at 20% down from current 30%. Income between Rs 12.5 lakh and Rs 15 lakh will be taxed at 25% down from current 30%. Incomes above Rs 15 lakh will continue to be taxed at 30%. However, to avail this scheme, which is optional, taxpayers will have to let go of exemptions.

Around 70 of the existing exemptions and deductions of different nature (more than 100) have been proposed to be removed. Remaining exemptions and deductions will be reviewed and rationalised in the coming years with a view to further simplifying the tax system and lowering the tax rate.

FM reassured taxpayers about commitment to eliminate tax harassment. "We wish to enshrine in the statutes a taxpayer charter through this Budget. Our govt remains committed to taking measures to ensure that our taxpayers are free from tax harassment of any kind," FM said.

FM proposed to abolish Dividend Distribution Tax (DDT). Companies will not be required to pay DDT. Dividend to be taxed only at the hands of recipients, at applicable rates.

In order to attract investment in power sector, the Union Budget proposes to extend the concessional corporate tax rate of 15% to new domestic companies engaged in the generation of electricity.

The Union Budget further proposed to extend the concessional rate of withholding of 5% under section 194LD to the interest payment made on the Municipal Bonds. The Finance Minister also proposed to further reduce the withholding rate from 5% to 4% on interest payment on the bonds listed on its exchange to incentivize listing of bonds at IFSC exchange.

The Union Budget proposed to provide an option to cooperative societies to be taxed at 22% +10% surcharge and 4% cess with no exemption/deductions. These cooperatives are currently taxed at a rate of 30% with surcharge and cess.

The Finance Minister also proposed to exempt these cooperative societies from Alternate Minimum Tax (AMT) just like Companies which under the new tax regime are exempted from the Minimum Alternate Tax (MAT).

FM proposed to extend the Rs 1.5 lakh benefit on interest paid on affordable housing loans by a year to March 2021.

In order to minimize hardship in real estate transaction and provide relief to the sector, the Union Budget proposed to increase the circle rate limit of 5% to 10%.

Keeping in view the need of MSME sector, customs duty is being raised on items like footwear (from 25% to 35% on footwear and from 15% to 20% on parts of footwear) and furniture (from 20% to 25%). FM stressed that labour intensive sectors in MSME are critical for employment generation. Cheap and low quality imports are an impediment to their growth, the Finance Minister said.

FM announced Rs 99,300 crore outlay for education sector in 2020-21 and Rs 3,000 crore for skill development. Degree-level full-fledged online education programme to be offered by the top 100 institutions in the country. New Education Policy to be announced soon. External commercial borrowings and FDI to be leveraged to improve the education system. Urban local bodies across the country to provide internships for young engineers for a period of up to one year. A medical college to be attached to a district hospital in PPP mode, viability gap funding to be set up for setting up such medical colleges.

To achieve the aspirational growth rate, the Finance Minister underscored the need to boost the flow of capital in the financial system, through the following measures, taken in consultation with RBI: FPI limits in corporate bonds are proposed to be increased to 15% of outstanding stocks from the current 9%. Specified categories of Government securities would be opened fully for non-resident investors, along with domestic investors as well.

New Debt-based Exchange Traded Fund (ETF) consisting primarily of Government Securities will be floated. This is on the back of the massive success of the previous version. Further, it is expected to give retail investors access to Government securities, attractive investment option to Pension Funds and long-term investors.

A new legislation is proposed for laying down mechanisms for netting of financial contracts. This is to improve investor confidence and further expand the scope of Credit Default Swaps.

A new mechanism would be devised to further support the Partial Credit Guarantee Scheme floated by the Government, post the Union Budget 2019-20, to address the liquidity crisis of NBFCs. The Government will offer support by guaranteeing securities so floated.

FM assured that robust mechanism is in place to monitor health of all schedule commercial banks and depositors money is absolutely safe. Deposit Insurance and Credit Guarantee Corporation has been permitted to increase deposit insurance coverage to Rs 5 lakh per depositor from Rs 1 lakh.

FM proposed to raise excise duty, by way of National Calamity Contingent Duty on Cigarettes and other tobacco products. However, no change is being made in the duty rates of bidis.

Economy:

The gross Goods and services tax (GST) revenue collected in January 2020 is Rs 1,10,828 crore of which CGST is Rs 20,944 crore, SGST is Rs 28,224 crore, IGST is Rs 53,013 crore (including Rs 23,481 crore collected on imports) and Cess is Rs 8,637 crore (including Rs 824 crore collected on imports). The total number of GSTR 3B Returns filed for the month of December up to 31 January 2020 is 83 lakh (prov).

The GST revenues during the month of January, 2020 from domestic transactions has shown an impressive growth of 12% over the revenue during January 2019. Taking into account the IGST collected from imports of goods, the total revenue during January 2020 has increased by 8% in comparison to the revenue during January 2019.

Meanwhile, the government's fiscal deficit touched 132.4% of the full-year target at December-end mainly due to slower pace of revenue collections, official data showed on Friday. In actual terms, the fiscal deficit or gap between expenditure and revenue was Rs 9,31,725 crore, the data released by the Controller General of Accounts (CGA) showed. The deficit was 112.4% of 2018-19 Budget Estimate (BE) in the corresponding period.

Further, the government revised downwards the economic growth rate for 2018-19 to 6.1% from 6.8% estimated earlier, mainly on account of deceleration in mining, manufacturing and farm sectors.

Buzzing Index:

Healthcare stocks were in demand after the Union Budget provided an additional Rs 69,000 crore for the health sector. Metropolis Healthcare (up 3.08%), Shalby (up 2.89%), Apollo Hospital (up 2.06%), Fortis Malar (up 1.86%), Thyrocare (up 1.58%), Dr Lal PathLab (up 1.23%), Indraprastha Medical (up 0.97%), Aster DM Health (up 0.91%), Kovai Medical (up 0.82%) and Fortis Healthcare (up 0.03%) edged higher.

Shares of pipe makers were in demand after FM Nirmala Sitharaman allocated Rs 3.6 lakh crore under Jal Jeevan Scheme for piped water projects. Finolex Industries (up 3.18%), Prince Pipes & Fittings (up 0.31%), Captain Pipes (up 1.66%), Srikalahasthi Pipes (up 2.55%), Indian Hume Pipes (up 1.17%), Premier Pipes (up 4.97%) were top gainers in pipe segment.

Four cigarette stocks dropped after Finance Minister Nirmala Sitharaman proposed to raise excise duty, by way of National Calamity Contingent Duty on cigarettes and other tobacco products, Nirmala Sitharaman said. However, no change is being made in the duty rates of bidis, she said. ITC (down 6.72%), Godfrey Phillips India (down 4.56%), VST Industries (down 1.79%) and Golden Tobacco (down 0.36%) were top losers in cigarette segment.

Shares of four firms catering to education sector rose after Finance Minister Nirmala Sitharaman gave impetus to sector in the Union Budget 2020-21. Navneet Education (up 2.33%), Zee Learn (up 2.19%), Career Point (up 1.98%) and MT Educare (up 1.97%) edged higher. Union finance minister Nirmala Sitharaman while presenting the Union Budget 2020-21 in Parliament today, 1 February 2020 announced Rs 99,300 crore outlay for education sector in 2020-21 and Rs 3,000 crore for skill development. New Education Policy would be announced soon. With the largest working population, government is taking steps to ensure education for all, she added.

Shares of aquaculture companies rose after the Finance Minister Nirmala Sitharaman said that the Government will increase the country's fish production capacity. The Finance Minister in the Union Budget 2020 said that India's production to be raised to 20 million tones. She added that framework for development, management and conservation of marine fishery and 377 sagar mitras and 500 fish farmer organizations will be added to help youth work in fish farming sector. Zeal Aqua (up 14.4%), Waterbase (up 5.58%), Apex Frozen (up 4.55%), Avanti Feeds (up 2.93%) and Coastal Corp (up 2.66%) were top gainers in aquaculture segment.

Stocks in Spotlight:

The budget proposed to sell government stake in IDBI Bank to private investors. Following the announcement, IDBI Bank surged 15.93% to Rs 39.30.

Maruti Suzuki India fell 1.53%. The car major's total sales rose 1.6% to 154,123 units in January 2020 from 151,721 units in January 2019. Total domestic sales stood at 144,499 in January 2020, up 1.7% from 142,150 units in January 2019. Exports rose 0.6% to 9,624 units in January 2020 from 9,571 units in January 2019.

M&M slumped 4.35%. Mahindra & Mahindra announced December 2019 sales numbers during market hours today. M&M's overall automotive sales (domestic + exports) stood at 52,546 vehicles in January 2020, down by 6% from 55,722 vehicles during January 2019. Domestic sales contracted 3% to 50,785 units while the total exports slumped 45% to 1761 units in January 2020 over January 2019. M&M Farm Equipment Sector's (FES) total tractor sales rose 4% to 23,116 units in January 2020 from 22,212 units in January 2019. Domestic sales in January 2020 were at 22,329 units, as against 20,948 units during January 2019, up 7% YoY. Exports for the month slumped 38% to 787 units from 1264 units in the year ago period.

Escorts tumbled 4.23%. Escorts tractor segment announced January sales figures before market hours today. Escorts' agri machinery segment (EAM) in January 2020 sold 6,063 tractors, registering a growth of 1.2% against 5,991 tractors sold in January 2019. The segment's sales are up 47.37% from 4,114 units recorded in December 2019. The company's domestic tractor sales in January 2020 stood at 5,845 tractors registering a growth of 1.4% against 5,762 tractors in January 2019. Exports in January 2020 stood at 218 tractors as against 229 tractors sold in January 2019, down 4.8% YoY.

Powered by Capital Market - Live News