Equity benchmarks of the Bombay Stock Exchange and the National Stock Exchange took a severe knock after the finance minister, Ms Nirmala Sitharaman, proposed a sharp hike ~ up to 42 per cent ~ on personal income of Rs 2 crore to Rs 5 crore and above. The 30-share Sensitive Index of BSE and the 50-scrip Nifty of NSE, that were steady albeit with a downside bias while the minister was addressing Parliament, went into almost free-fall mode because I-T surcharge came as bolt from the blue for big market participants.

Analysts say the impact of additional tax on the rich may also deter foreign portfolio investors or FPIs who often channelise offshore stock investors funds into Dalal Street. The market remained under pressure and the two benchmarks closed with bigger-than-expected cuts for the week. The Sensex closed for the day at 39,513.39 points, registering a decline of 394.67 points or 0.99 per cent. In the Sensex pack, six shares moved up and 24 were down. The Nifty ended 1.14 per cent or 135.60 points lower at 11,811.15 points with six shares gaining and 44 losing.

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The Nifty Bank settled flat with positive bias at 31,475.80 points, up 3.95 points or 0.01 per cent. The Nifty PSU Bank rose 0.18 per cent or 6.05 points to 3,303.35 points. In early trade, the Sensex and the Nifty opened with positive gaps. The BSE benchmark crossed 40,000-mark to register a high of 40,032.41 (+124.39) points and the Nifty rose to 11,981.75 (+87.00) points expecting sops for the business and industry such as cut in corporate tax, steps to bail out non-banking financial companies of NBFCs ~ in particular housing finance companies ~ and other financial and banking segment reforms.

It did happen as Ms Sitharaman announced Rs 70,000- crore fresh recapitalisation programme for state-run lenders and also brought NBFCs (HFCs) under monetary regulator the Reserve Bank of India, but these announcement could not buoy market participants’ mood who continued to book profits which pushed all sectoral indices into red. Another takeaway from the Budget proposals is reduction in promoters’ stake in a company/entity from 75 per cent to 65 per cent. According to data with brokerages, a little more than 1,1000 companies have 75 per cent or more stake in the businesses they run. But from retail investors/shareholders perspective, it is a positive move, say analysts.

Analysts say most of the market participants’ expectations have been met in the Budget, but the single adverse proposal of hiking income surcharge on high networth investors who make more than Rs 2 crore income has bruised the market’s mood.

Analysts say the knee-jerk selloff, mainly by high networth investors or HNI, was responsible for the benchmarks to go into free-fall mode in mid-session. The Sensex that had gained in the morning plunged to 39,441.38 (-466.66) points and the Nifty crashed to 11,946.75 (-146.10) points. Nevertheless, overall sentiment appeared improving in the last hour of trade in Dalal Street as the benchmarks pared their losses.