In a rare display of speedy resilience stock market indices took the Finance Minister Arun Jaitely’s budget announcement imposing 10 per cent Long-Term Capital Gains (LTCG) tax on profits accrued from share transactions in their stride and staged a strong comeback tiding over mid-session jitters.
Regardless of suffering two major shocks~LTCG tax and the slippage in the budgeted annual fiscal deficit mainly on account of decline in indirect tax collection ~the 30-scrip Sensitive Index of BSE and 50-share Nifty of NSE closed the crucial day recouping intra-day huge losses with late comeback which many analysts credit to short covering by traders. Indices moved sharply through the entire session almost reacting to each positive or otherwise budget proposal enunciated by Jaitley.
Snapping previous two sessions’ declining trend, Sensex and Nifty resumed with a positive gap on Thursday and held on to those gains for most part of Jaitley’s speech in Parliament. A sharp decline set in as soon as the FM confirmed imposition of LTCG tax and conceded that the government failed to honour its commitment to contain annual fiscal deficit for 2017-18 at 3.2 per cent on account of shortfall in revenue collection through Goods and Services Tax (GST).
Analysts point out 10 per cent LTCG tax on returns from share business does not appear to be a big burden considering that even retail investors are not looking for long-term investment except in a few large cap stocks.
The benchmarks swayed violently through the day’s entire session. In the early deals, Sensex increased to intra-day 36,225.97 (+260.95) points and Nifty touched 11,103.50 (+75.80) points. The indices crashed sharply to lows of 35,501.74 (-463.28) points and 10,878.80 (-148.90) points before a smart comeback to green zone set in.
But the gains were again frittered away which analysts blame on cycles of sell-off and short covering. Sensex finally closed 0.16 per cent down at 35,906.66 (-58.36) points. Nifty lost 0.10 per cent to close 11,016.90 (-10.80) points. Nifty Bank was steady in green zone for most part of the session but started losing in final 30 minutes . It settled at 27,220.70 (158.75) points.