RTTNews - The Indian market slumped on Monday after the Union budget failed to live up to market expectations. Finance Minister Pranab Mukherjee remained silent on key issues like the revamp of fuel policy, reduction in corporate tax and the disinvestment road-map while projecting a rise in budget deficit to 6.8 percent of the GDP for FY10 from 6.2% in the last interim budget.
Traders were disappointed as the budget lacked aggressiveness on reforms and policies on foreign direct investment. The hike in minimum alternate tax (MAT) to 15% from 10% spooked the market.
Stocks were dumped across the board ignoring the positive aspects of the budget. Bowing to the long standing demand of India Inc, the finance minister abolished the fringe benefit tax and commodity transaction tax, unveiled direct subsidies for farmers, extended deduction in respect of export profits by one more year, allowed to carry forward the MAT from seven years to ten years and extended the scope of the current provision of weighted deduction of 150% on expenditure incurred on in-house R&D to all manufacturing businesses except for a small negative list.
Focus on rural consumers, a 45 percent jump in funds for the flagship program Bharat Nirman, higher spending on urban development, restoration of seven year tax break on natural gas production, extension of the existing 2 percent interest subvention on bank loans to exporters beyond the current deadline of September 30,2009 to March 31,2010, focus on reviving economic growth to 9 percent as also the indications for bold tax reforms were among the highlights of the UPA government's inclusive budget.
After trading firm in early trading, the BSE Sensex plunged to a low of 13,959 before finishing at 14,043, down 870 points or 5.83% from its previous close. Similarly, the S&P CNX Nifty shed 259 points or 5.84% to 4,166, the broad-based BSE 500 index slumped 5.58%, the mid-cap index melted 5.17% and the small-cap index tumbled 4.50%.
On the BSE, the market breadth was extremely negative, as decliners outnumbered advancers by 2015 to 556 with 62 stocks closing unchanged.
While commenting on market crash post the budget announcement, Mukherjee said that he doesn't understand the market reaction. The market might have expected too much of the budget in one go, forgetting realty, he said. Budget is not the only forum to redress grievances, he added.
Banking stocks bore the brunt of the selling following rising bond yields after the government announced a higher -than-expected Rs.4,51,000 crore market borrowing for FY10 compared to an interim budget target of Rs.3,62,000 crore. Indus Ind Bank(down 11.56%), ICICI Bank(down 10.09%), IDBI Bank(down 9.62%), Axis Bank(down 8.90%) and SBI(down 8.60%) were the major losers.
Realty stocks plummeted after the budget failed to come up with specific proposals for the housing sector. Unitech plunged 9.26%, DLF slumped 8.23%, Indiabulls Real Estate slumped 6.26% and Omaxe, HDIL and Anant Raj Industries tumbled over 5% each.
Metal stocks melted after industrial metals retreated on the London Metal Exchange on Friday. Tata Steel(down 9.55%), Ispat Industries(down 8.45%), Hindalco(down 6.69%), Sterlite Industries(down 6.54%) and SAIL(down 6.50%) were the top decliners.
Likewise, public sector, power, oil/gas and capital good stocks, which outperformed the market rally in recent weeks, fell over 5% each due to the disappointment over the budget. Auto, healthcare and consumer durable stocks also ended notably lower, but defensive FMCG stocks like ITC and Hindustan Lever rose on budget's rural focus. Asian Paints and Ranbaxy Laboratories also closed in positive territory.
Fertilizer stocks closed sharply lower across the board after the government mooted a change in fertilizer subsidy regime to unshackle the fertilizer manufacturing sector, encourage fresh investments and implement direct transfer of subsidies to farmers.
JBF Industries fell 3.57% after the finance minister hiked excise duty on polyester chips from 4% to 8%. Dish TV India plunged nearly 8% after the introduction of a 5% customs duty on set top boxes.
Titan Industries rose 2.97% after the budget exempted branded jewelery makers from paying excise duty. ITC rallied over 3% after the finance minister kept excise duty on cigarettes unchanged.
Hindustan Dorr-Oliver ended down 0.42% despite bagging an order worth Rs 60.30 crore. Gujarat Alkalies tumbled over 5% despite reporting a 17% rise in its standalone net profit for the quarter ended March.
Elsewhere, the other markets across the Asia-Pacific region ended in the red ahead of the upcoming earning season, European stocks were trading lower in early trading following softening of the commodity prices and U.S. Stocks are set to open the new week on a downbeat note after weaker jobs report dented hopes of recovery and raised fresh concerns about the weak economic fundamentals in the world's largest economy.
Crude-oil futures dropped $2.88 a barrel to $63.85 amid thin trading in Asia Monday, weighed down by negative sentiment resulting from earlier U.S. macroeconomic data.
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