India Stocks Log Worst Budget-Day Drop Since 2009 on Growth Woes
Inside the Bombay Stock Exchange building in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

India Stocks Log Worst Budget-Day Drop Since 2009 on Growth Woes

(Bloomberg) -- India’s benchmark stock index had its biggest budget-day plunge since 2009 after measures announced by Finance Minister Nirmala Sitharaman failed to cheer investors.

The S&P BSE Sensex tumbled 2.4% to 39,735.5 at the close, also the steepest drop in more than three years. The NSE Nifty 50 Index retreated 2.5% to 11,661.9.

India Stocks Log Worst Budget-Day Drop Since 2009 on Growth Woes

Scrapping the dividend distribution tax on companies and cutting taxes for individuals didn’t impress investors, who were counting on more aggressive steps to spur a slowing economy. Sitharaman surprised the market by announcing plans to sell part of its holding in the behemoth Life Insurance Corp. of India, which sparked sharp declines in private insurers.

“The market saw a sharp sell off as expectations were sky-high,” said Amar Ambani, head of research at Yes Securities Ltd. “The market expected an overhaul of personal income tax slabs in a year that has seen flat tax revenue growth.”

ITC Ltd. was the worst performer on the Sensex. The stock plunged 6.9%, the most in over two years, after a proposal to raise excise duty on tobacco and cigarettes. Mortgage financiers and real estate firms also tumbled, with HDFC Ltd. slumping 6% and DLF Ltd. plunging 12%.

Strategist Views:

“No significant incentives for infrastructure and real-estate is disappointing,” said Mihir Vora, chief investment officer at Max Life Insurance Co in Mumbai. “The budget reflects the constraints of the sluggish economy within which Finance Minister has had to operate.”

“The budget has tried to tread fine line between fiscal prudence and stimulating consumption. It is marginally good for consumption,” said Ashish Shankar, head of investments at Motilal Oswal Private Wealth Management. “I don’t think this will spur growth immediately. Markets will look for global cues and earnings going forward.”

“From capital markets perspective, though the budget is negative for domestic investors, it is positive for foreign institutional investors due to the change in dividend distribution tax,” said Abhimanyu Sofat, head of research at IIFL Securities in Mumbai.

The Numbers

  • Seventeen of 19 sector sub-indexes compiled by BSE Ltd. declined, led by a gauge of real estate companies, which fell 7.8%
  • Twenty-four shares fell while 6 rose
  • HDFC contributed most to the Sensex decline, sliding 5.9%. ITC was the biggest loser with a 7% decline. TCS provided the biggest boost the index and gained the most wit ha 4.1% rise

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