Market Wrap, Feb 1: Sensex tumbles nearly 1,000 pts as Budget disappoints

The much anticipated Union Budget for 2020-21 turned out to be a big disappointment for the market as a wider fiscal deficit (at 3.8 per cent ) for FY20, absence of any announcement on reduction in Long-Term Capital Gain (LTCG) tax, and a new personal income tax regime (that came with various riders) gave away no clear roadmap of how the government planned to bring the country out of the persisting economic slowdown.

Finance Minister Nirmala Sitharaman on Saturday unveiled the budget for fiscal 2020-21, vowing to boost income and purchasing power of the citizens, in a bid to revive domestic economic growth that has slumped.

Sitharaman introduced new slabs and reduced the tax rate for different slabs for an individual income of up to Rs 15 lakh per annum, basis that the taxpayer opts for foregoing exemptions and deductions. The new tax regime will be optional and the taxpayers will be given the choice to either remain in the old regime with exemptions and deductions or opt for the new reduced tax rate without those exemptions.

That apart, the finance minister said dividend distribution tax has been shifted to individuals instead of companies.

This and no review of the Long-Term Capital Gain (LTCG) tax sent the indices down in the dumps.

The benchmark S&P BSE Sensex plunged 1,274 points from the day's high, before settling 988 points, or 2.43 per cent, lower at 39,735. Only 5 of the 30 constituents,  including TCS, HUL, Nestle, and Infosys, settled the day in the green. Heavyweights like HDFC twins, ITC, ICICI Bank, Reliance Industries, L&T, and SBI slumped up to 7 per cent, exerting the pressure on the markets.

On the NSE, the Nifty50 closed at 11,644, down 392 points or 3.26 per cent. 

Sectorally, Nifty Realty index tanked over 8 per cent at close as the Budget ruled out any sop to help the sector reduce the inventory build-up. That apart, Nifty Bank, Private Bank, Metal, Financial Services, Auto, and Public Sector Bank indices settled over 3 per cent lower. 

Shares of insurance companies, mainly life insurance, tumbled up to 11 per cent in intra-day trade on the BSE on Saturday after Finance Minister Nirmala Sitharaman proposed to list state-owned insurance behemoth Life Insurance Corporation on stock exchanges. The government proposes to sell a part of its holding in LIC through initial public offer, Finance Minister Nirmala Sitharaman said while unveiling Budget 2020-21.

In the broader market, the S&P BSE mid and small-cap indices closed over 2 per cent lower each at 15,120, and 14,345 level, respectively.