Equity indices decline on weak global cues, LTCG tax worry

Last Friday, the equity indices fell the steepest since November 2016 as reintroduction of the long-term capital gains (LTCG) tax in the Budget led to a huge sell-off in the markets.
Sensex crashes

Mumbai, Feb 5: With disappointment over the reintroduction of the long-term capital gains (LTCG) still looming over the Indian markets, the key equity indices on Monday slid into the negative territory for the fifth consecutive session following weak global cues and selling pressure.

According to market observers, announcements in the Budget like the LTCG tax and a higher-than-expected fiscal deficit target for 2018-19 continued to dampen investors’ risk-taking appetite.

The barometer 30-scrip Sensitive Index (Sensex) on the BSE closed below the 35,000-level at 34,757.16 points — down 309.59 points or 0.88 per cent from Friday’s close.

The BSE market breadth was bearish as 1,753 stocks declined as against 1,027 advances.

The wider Nifty50 of the National Stock Exchange receeded by 94.05 points or 0.87 per cent to close at 10,666.55 points.

“Markets corrected further on Monday, however, a slow bounce back from the lows helped to curb the losses. The weakness came on the back of a hit in investor sentiments after the Finance Minister had announced bringing the LTCG tax in Union Budget 2018 and projected a higher-than-expected fiscal deficit of 3.3 per cent for FY19,” Deepak Jasani, Head, Retail Research, HDFC Securities, told IANS.

“Weakness in global equity markets further added to the selling pressure in the Indian markets. Major Asian markets closed on a negative note, barring the Shanghai index, while the European indices like FTSE 100, DAX and CAC 40 traded in the red,” he said.

In the broader markets, the S&P BSE mid-cap index closed lower by 0.09 per cent, and the small-cap index by 0.37 per cent.

Contrary to the view of market analysts, the government said the downslide of the equity indices was not in reaction to the LTCG tax reimposition announcement but negative global cues.

“It is not due to the Budget or the LTCG. Dow Jones has also fallen by over two per cent,” Finance Minister Arun Jaitley told reporters on Monday.

On the currency front, the Indian rupee closed flat at 64.06 against the US dollar.

Provisional data with the exchanges showed that foreign institutional investors sold scrips worth Rs 1,263.57 crore, while domestic institutional investors purchased stocks worth Rs 1,163.64 crore.

Vinod Nair, Head of Research, Geojit Financial Services, said: “Selling continued in the market as concern over bond yield and weak global market impacted the sentiment.”

“Upcoming RBI monetary policy will be a key trigger for the market, the outcome of which is expected to be status quo, but any commentary over government’s fiscal policy and concern over rising yield will add volatility,” he added.

Sectorwise, the S&P BSE capital goods index declined by 528.85 points, followed by banking index by 333.43 points and finance index by 91.16 points.

On the other hand, the S&P BSE auto index edged higher by 184.46 points, telecom index by 23.85 points and FMCG index by 20.94 points.

Major Sensex gainers on Monday were: Bharti Airtel, up 4.20 per cent at Rs 439.50; Tata Motors, up 3.12 per cent at Rs 396.05; Tata Motors (DVR), up 2.27 per cent at Rs 218.80; Power Grid, up 2.08 per cent at Rs 196.50; and ITC, up 1.43 per cent at Rs 279.25.

Major Sensex losers were: HDFC, down 4.06 per cent at Rs 1,825.95; Larsen and Toubro, down 3.65 per cent at Rs 1,362.75; Kotak Bank, down 2.66 per cent at Rs 1,058.55; IndusInd Bank, down 2.36 per cent at Rs 1,714.25; and Bajaj Auto, down 2.12 per cent at Rs 3,174.

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