The Sensex hit fresh intraday low while the Nifty was hovering near the day's low in early afternoon trade. At 12:25 IST, the barometer index, the S&P BSE Sensex, was down 572.72 points or 1.60% at 35,333.94. The Nifty 50 index was down 168.25 points or 1.53% at 10,848.65. The Sensex was trading below its psychological 36,000 mark and the Nifty was trading below its psychological 11,000 mark.
The introduction of the long-feared long-term capital gains, or LTCG, tax on stocks roiled investors. Negative leads from Asian markets also spoiled sentiment. Cautiousness also prevailed ahead of the Reserve Bank of India (RBI)'s monetary policy review next week. RBI will hold its monetary policy meeting on Wednesday, 7 February 2018. Investors were also miffed as the fiscal deficit target for FY2018 was extended to 3.5% of GDP in the Budget, from 3.2% pegged earlier.
The Sensex fell 610.96 points, or 1.70% at the day's low of 35,295.70 in early afternoon trade, its lowest intraday level since 19 January 2018. The Nifty fell 190.40 points, or 1.73% at the day's low of 10,826.50 in mid-morning trade, its lowest intraday level since 19 January 2018.
The broader market depicted weakness. The BSE Mid-Cap index was down 2.66% while the BSE Small-Cap index was down 3.37%. Both these indices underperformed the main barometer, the Sensex.
The market breadth was quite weak. On BSE, 2,368 shares fell and 279 shares rose. A total of 110 shares were unchanged.
Most IT shares declined. Persistent Systems (down 1.99%), MphasiS (down 1.77%), Hexaware Technologies (down 0.95%), Oracle Financial Services Software (down 0.85%), MindTree (down 0.68%), Wipro (down 0.63%) and Infosys (down 0.23%), edged lower. HCL Technologies (up 0.89%), Tech Mahindra (up 0.89%) and TCS (up 0.90%), edged higher.
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Pharma shares were mixed. Wockhardt (down 2.3%), Piramal Enterprises (down 2.23%), Alkem Laboratories (down 1.65%), Cadila Healthcare (down 1.03%), GlaxoSmithKline Pharmaceuticals (down 0.91%), Strides Shasun (down 0.88%), Lupin (down 0.35%), Divi's Laboratories (down 0.25%) and IPCA Laboratories (down 0.23%), edged lower. Dr Reddy's Laboratories (up 0.16%), Cipla (up 0.40%), Sun Pharmaceutical Industries (up 0.61%), Aurobindo Pharma (up 0.73%) and Glenmark Pharmaceuticals (up 1.10%), edged higher.
The Union Minister for Finance and Corporate Affairs Arun Jaitley while presenting the Union Budget 2018-19 in Parliament yesterday, 1 February 2018, reintroduced LTCG tax. Investors will have to pay 10% tax on profits exceeding Rs 1 lakh made from sale of shares or equity mutual fund units held for over one year. However, all gains up to 31 January 2018 will be grandfathered. Finance minister also proposed to introduce tax on distributed income by equity oriented mutual funds at the rate of 10%.
The major takeaways from the Budget were infrastructure boost, benefits to marginal farmers, extending corporate tax rate cut to Micro, Small & Medium Enterprises (MSME), and encouraging rural spending. Jaitley set disinvestment target of Rs 80,000 crore for 2018-19. The government revised the deficit target for the year ending in March 2018 to 3.5% of gross domestic product (GDP). The fiscal deficit target for 2018-19 was projected at 3.3% of the GDP.
The government is firmly on course to achieve high growth of 8% plus as manufacturing, services and exports are back on good growth path. While GDP growth at 6.3% in the second quarter of 2017-18 signalled turnaround of the economy, growth in the second half is likely to remain between 7.2% to 7.5%.
Overseas, Asian shares were mixed. Japan's Nikkei 225 fell 0.69% after the Bank of Japan on Friday conducted a special bond purchase operation to stem the rise in Japanese bond yields.
US shares ended mostly lower on Thursday as fears of a pick up in inflation and rising bond yields spoiled sentiment.
In US, the number of people who applied for unemployment benefits in late January fell by 1,000 to 230,000. Further, the productivity of American firms and workers fell at a 0.1% annual pace in the fourth quarter. Separately, the Institute for Supply Management said its manufacturing index in January slipped to 59.1% from 59.3% in December.
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