Like her July 2019 budget which she presented after the BJP came to power with a massive mandate in the general elections, markets gave a thumbs down to Finance Minister Nirmala Sitharaman’s budget speech today. The topline equity indices witnessed one of their sharpest single-day fall in more than a decade after Sitharaman’s Union Budget 2020 failed to live up to market expectations of growth-boosting measures and fiscal discipline.
During Sitharaman’s previous budget speech in July last year, the indices saw a 1 per cent fall. The Sensex had slipped 394.67 points (0.99 per cent) to 39,513.39, while the Nifty had declined 135.60 points (1.13 per cent) to 11,811.15.
Today, the 30-share BSE benchmark slumped 987.96 points (2.43 per cent) to settle below the 40,000 level mark at 39,735.53, while the 50-share Nifty cracked 300.25 points (2.51 per cent) to end below 12,000 mark at 11,661.85.
The indices fell sharply almost immediately after Sitharaman during her Budget 2020 speech pegged the fiscal deficit at 3.8 per cent for the current fiscal year (FY20). The government earlier had a fiscal deficit target of 3.3 per cent of GDP.
Following today’s sharp fall, the benchmark indices have erased almost all of their gains during the past six months since Sitharaman’s previous budget speech in July 5, 2019.
After today’s session of trade, the Sensex still shows a rise of 222.14 points or 0.56 per cent from the previous budget, however, the Nifty shows a decline of 149.30 points or 1.26 per cent.
According to market analysts, the new income tax slabs raised the concerns of declining inflows in tax-saving investment instruments.
“The lack of major growth boosting measures in itself is negative for the equity market. The new income tax regime would also be negative for tax exempt equity savings schemes. Recasting of dividend taxation norms also seem to be on the balance negative for most domestic equity investors. Overall, the budget seem to be negative for the equity market,” Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares & Stock Brokers wrote in a post budget analysis report.
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