Sensex, Nifty take a hit post Budget 2018. 5 reasons weighing on sentiment

LTCG, fiscal slippage and global selloff, among others, are some of the reasons behind this fall.

   

A day after Finance Minister Arun Jaitley presented the Union Budget 2018, equity markets in India took a beating on the back of several announcements made in his speech.

The Sensex lost over 300 points intraday in the opening minutes of trade, while the Nifty lost almost 100 points and traded near 10,900 levels.

Midcaps have continued to crack, while financials, pharma and metals are trading weak as well.

Long-term capital gains tax

The move surprised D-Street as most analysts were factoring in a change in definition of ‘Long Term’ to 2 or 3 years from 1 year. An imposition of additional tax over and above this time-frame issue spooked investors.

The government introduced the much talked about long term capital gains tax (LTCG) on sale of listed securities on gains of over Rs1 lakh.

Jaitley, introduced a long-term capital gains tax of 10 percent if the gains exceed Rs 100,000 without allowing the benefit of indexation. However, all gains till January 31, 2018 will be grandfathered and short term capital gains remains unchanged at 15 percent.

Fiscal slippage

The market is also worried about the fiscal slippage issue, largely because of the degree of deviation as well.

The government revised the fiscal deficit target to 3.5 percent of GDP to for 2017-18, indicating a deviation from the path of fiscal consolidation because of a spillover impact of the new indirect tax system—Goods and Services Tax.

For the next financial year 2018-19, fiscal deficit target is pegged at 3.3 percent of Gross Domestic Product (GDP).

“Revised fiscal deficit estimates for 2017-18 are Rs 5.95 lakh crore at 3.5 percent of GDP. I am projecting a fiscal deficit of 3.3 percent of GDP for the year 2018-19,” Jaitley said while presenting Union Budget, 2018.

Tax on income from equity mutual funds

In times when flows from mutual funds were one of the highest, the imposition of a fresh tax on income from them could have spooked investors too.

Investors will have to pay 10 per cent tax on distributed income from equity oriented mutual funds, as per the Budget proposals announced.

Besides, the overall investor sentiment will be hit with the introduction of 10 per cent tax on long term capital gains exceeding Rs 1 lakh, as mutual funds have recently emerged as a key route to invest in stock markets, experts said.

Global markets

The Nifty futures on Singaporean exchange (SGX Nifty) was trading were trading over a 100 points lower, hinting at the selloff that is visible in Indian market as well.

Meanwhile, other global indices are trading weak too, probably why the market is showing weakness here as well.

Asian shares came under pressure after Wall Street closed mixed and yields on US government debt rose in the last session.

Japan's Nikkei 225 declined 1.3 percent after snapping a six-day losing streak in the previous session. Technology names were mostly lower, with heavyweight SoftBank falling 1.5 percent.

The US equities pulled back as investors worried about rising interest rates.

The S&P 500 declined 0.1 percent to close at 2,821.98 after rising as much as 0.4 percent. The Nasdaq composite fell 0.4 percent to 7,385.86. Earlier, the tech heavy index traded 0.4 percent higher as Facebook shares hit an all-time high. Facebook reported better-than-expected earnings and revenue on Wednesday.

Technical factors

The D-Street on Thursday witnessed a volatile day as the index moved in a band of over 200-points on throughout the trading session which led to a formation of a ‘High Wave’ kind of pattern on the daily candlestick charts.

A High Wave kind of pattern is formed when there is a long upper shadow and a long lower shadow with a small body. The pattern is similar to a spinning top kind of pattern but in the high wave, the shadows are longer.

Experts said that if bears manage to push the indices below 10900 levels on closing basis then trend should turn in their favour. Traders are advised to maintain a stop below 10900 levels on closing basis.

A fall around those levels in the opening tick could have led to the selloff here.

MORE WILL UPDATE SOON!!

Sensex, Nifty end rangebound session at new closing high; Coal India rises 6%

The continued record-hitting spree suggested that the market may be pricing in likely recovery in corporate earnings for December quarter, experts feel.

 

The market continued its buoyant mood on Tuesday as benchmark indices ended rangebound session at new closing high. The midcaps, however, snapped a four-day winning streak as investors await corporate earnings.

The 30-share BSE Sensex was up 90.40 points at 34,443.19 and the 50-share NSE Nifty rose 13.40 points to 10,637, tracking positive global cues.

The momentum suggests that the market may be pricing in likely recovery in corporate earnings for December quarter. Union Budget, which will be presented on February 1, will also be closely watched, say experts.

He remains neutral on the markets and would not recommend entering fresh positions at this juncture.

The broader markets failed to continue its uptrend for fifth consecutive session today as the Nifty Midcap closed lower by 0.12 percent on weak breadth. About three shares declined for every two shares rising on the BSE.

Sectoral indices ended on a mixed note as Nifty Bank, FMCG and IT were mildly higher whereas Auto, Pharma and PSU Bank lost 0.3-0.7 percent. Realty gained the most, rising nearly 3 percent.

Coal India was the biggest gainer among Nifty50 stocks, climbing nearly 6 percent on revision in non-coking coal prices that will add around Rs 1,956 crore to its revenue for FY18.

Index heavyweights Reliance Industries (up 1.34 percent), ITC (1.86 percent) and Infosys (0.51 percent) continued to support the market today as well.

IOC, Tata Motors and Wipro were other gainers with 1-2 percent upside whereas Eicher Motors, Bajaj Finance, Bharti Airtel, Hindalco, Zee Entertainment and HPCL lost 1-2 percent.

Bharti Infratel was down 1.6 percent. Despite the 22 percent decline in last two months, HDFC Securities reiterated its sell rating on the stock with revised target price at Rs 310 (from Rs 387 earlier), citing instant loss of tenancies on merger of Vodafone-Idea Cellular, and impact of Reliance Communications and Aircel businesses’ scaling down.

ICICI Lombard General Insurance lost 7 percent. Macquarie has initiated coverage on the stock with Underperform rating and target price at Rs 565 (which is far lower than current share price) as the business is suffering from underwriting losses despite several catalysts for growth.

Jaiprakash Associates was down 7 percent as the Reserve Bank of India has sought Supreme Court nod to initiate insolvency proceedings against the company. Jaypee Infratech also fell 5.5 percent and Jaiprakash Power Ventures was down 3 percent.

NMDC slipped 4.5 percent as the government set floor price for offer for sale (OFS) at Rs 153.5 per share, lower than Monday's closing price of Rs 161.85. The offer for sale issue will remain open till Wednesday.

Coffee Day Enterprises and Quick Heal Technologies saw monster rally today, rising 20 percent and 17 percent, respectively.

Reliance Power, Reliance Communications, Peninsula Land, GMR Infrastructure, Jet Airways, IFCI and Wockhardt among others slipped 3-7 percent whereas Indiabulls Real Estate, Prakash Industries, PC Jeweller, J Kumar Infra, NCC, Suzlon, HEG and Gujarat Alkalies gained 3-8 percent.

On the global front, European markets were higher as investors reacted to better-than-expected economic data and shrugged off a tech wobble in Asia. France CAC, Germany DAX and Britain FTSE were up 0.2-0.5 percent at the time of filing this piece. Asian stocks also extended gains today as Japan's Nikkei was at 26-year high, rising 0.6 percent at close.

MORE WILL UPDATE SOON!!