INSUBCONTINENT EXCLUSIVE:
Mumbai: Sensex logged its biggest single-day decline in more than three years, as it nosedived nearly 1,000 points in a special trading
lost Rs 3.54 lakh crore as total market capitalisation of BSE-listed firms came down to Rs 152.97 lakh crore from Rs 156.50 lakh crore on
Friday.
Contrary to expectations, Budget did not offer any specific sectoral sops, and tax experts dubbed the new personal tax rules as
The much-awaited tweak to long-term capital gains tax did not find a mention, and while dividend distribution tax (DDT) was abolished, it
will now be taxed in the hands of the recipients.
Experts believed that the divestment target of Rs 2.1 lakh crore was also too
cent or 318.30 points to close at 11,643.80 points
This was the worst close for both the indices since October 27, 2019.
Here are the key factors which led to the meltdown in Indian
market:
Lack of sectoral sopsBudget didn't have specific sops for any sector, be it auto or real estate, as widely expected to create demand
in the economy and lift it out of the current slowdown
The support for the economy in terms of more spending was lacking in details, he said.
Income-tax slab confusionThere was some
disappointment over the removal of all the exemptions under Section 80C
Also, by giving the option to choose between old and new income-tax formats, things have gotten more complicated, analysts said
"While a new tax regime with lower tax rates has been introduced, the removal of all exemptions, including Section 80C exemptions, will
water down its benefits.
The option to choose between the old or new income-tax regimes will complicate filing tax returns, which was
investment platform.
No LTCG revisitThe market was largely expecting the Finance Minister to make some tweaks to long-term capital gains tax
But there was no such announcement
Investors were expecting the government to either abolish the tax or extend the tenure to two years from one at present
The government re-introduced LTCG in 2018 after a gap of 14 years
Analysts said it has caused significant confusion without yielding meaningful increase in tax collection.
Divestment target a bit too
target for FY21 a bit too high, even if one includes the LIC stake sale
Securities.
Higher dividend tax on recipientsFinance Minister Sitharaman announced the abolition of dividend distribution tax (DDT), which
will lead to a Rs 25,000 crore in revenue hit
But dividends will now be taxed in the hands of recipients
Amar Ambani, Senior President and Research Head at YES Securities, said taxation of DDT in hands of investors at their I-T slab rates is a
negative move for domestic investors.
Market at a glanceBears were completely in charge on the bourses, as nearly three shares declined for
every share that advanced on BSE.
Broader market slumped in tandem with benchmarks
BSE Midcap and BSE Smallcap indices dropped 2.21 per cent and 2.20 per cent, respectively.
All, but three sectoral indices were in deep red
BSE Capital goods index and BSE Industrials index fell the most, as they dropped 4.79 per cent and 3.94 per cent respectively.
As many as 24
out of 30 Sensex stocks closed lower, with financials contributing the most to the losses.
Mortgage lender HDFC (231.67 points) contributed
Private lender ICICI Bank (128.56 points), followed next, as it shed 4.01 per cent.
Cigarettes-to-hotels firm ITC was the top Sensex loser,
and it tumbled nearly 7 per cent, after Sitharaman proposed to hike excise duty on cigarettes and other tobacco products
Rival Godfrey Phillips also dropped 6.82 per cent.
Shares of insurance companies plunged as there was no tax exemption for insurance
In fact, the new tax regime takes away exemptions for insurance policies for taxpayers.
Shares of ICICI Prudential Life plunged 10.93 per
Rivals SBI Life and HDFC Life Insurance tumbled 10.02 per cent and 6.06 per cent respectively.
Sitharaman said if taxpayers adopt the new
tax regime, they will have to forego exemptions that they avail
This also includes tax exemptions for insurance premiums.
Shares of IDBI Bank bucked the trend and jumped 10.03 percent after the Finance
is there was a widespread expectation that LTCG would be removed and that could actually boost the higher level of participation in the
Second, though they are keeping fiscal deficit at 3.8 per cent, the large proportion of the fiscal balance is also coming on account of Rs
expectations were sky-high
The market expected an overhaul of personal income tax slabs, whereas we expected only a minor tweak, in a year that has seen flat tax
Market participants possibly also expected more measures to revive economic growth and ignored the containment of fiscal deficit in FY21 to