Budget 2018 impact: Indian stock market's reaction is fairly bearish

The Indian bond market has also responded bearishly with a spike in sovereign yields. The yield of the benchmark 10-year bond has risen to a 22-month high

The market's reaction to the Budget is fairly bearish. This can partly be explained by the imposition of tax on long term capital gains (and dividend distribution tax on equity mutual funds) on equities. That has hurt Indian investors. The foreign portfolio investors (FPI) may have some protection if they are operating out of tax havens. But, FPIs have also turned wary due to the expansion of the fiscal deficit to 3.5 per cent of the GDP in 2017-18, and the inability to curb expenditure in 2018-19. The FPI reaction has also caused a spike in the US dollar with