Lackluster Budget dampens sentiments at Dalal Street; Sensex plunges over 1%

The much awaited Union Budget 2012-13 proved to be a depressing one for the stock markets in India as the ruling government chose to play it safe at a time when absolutely nothing seemed to be going its way and remained muted on major reforms that the market participants desperately waited for. Indian stock markets commenced the day on a promising note with a positive start despite the cautious cues from Asian markets.

The markets got underpinned soon after the Finance Minster started divulging the details of Union Budget 2012-13. Just when it looked like the benchmark equity indices would spurt to higher levels sailing beyond the psychological 17,900 (Sensex) and 5,450 (Nifty) levels, sentiments got spooked as Pranab Mukherjee proposed to hike excise duty and service tax that did not go down well with investors.

The volatile trading session saw investors square of positions largely across the board as they even overlooked the measures aimed at increasing participation of retail investors in stock markets, including a tax-saving scheme for first-time investors, 20% STT cut to 0.1% by the government to reduce transaction costs in the capital markets. The ambitious budget which appeared full of tall promises lacked a concrete roadmap as it failed to spell out how the government will go about fulfilling them.

Investors booked hefty profits in the Oil & Gas counter which bore the maximum brunt of selling pressure plunging over 3% followed by the Power and Capital Goods sectors which got thrashed by close to three percent each. The banking index which traded on a positive note earlier in the session after Budget proposed to provide a sum of Rs 15,880 crore capital support to all public sector banks, plunged by the end of day’s trade.

However, investors were seen piling up positions in defensive FMCG which settled with about 2% gains while some carmakers gained traction since increase in the excise duty on all products in the Budget for 2012-13, would lead companies like Maruti Suzuki and Mahindra & Mahindra to hike prices of their vehicles by up to Rs 70,000. Also shares of select broking firms cheered the Finance Minister's announcement to reduce in securities transaction tax and introduce tax sops for new equity investors, in the Union budget for FY 2013.

In the global space, Asian markets largely settled on a pessimistic note as sentiments in the region remained cautious after market participants focused on the implications of a recent string of negative cues from world’s second largest economy China, shrugging the encouraging US economic reports which signaled that the number of Americans claiming new jobless benefits fell back to a four-year low last week and manufacturing activity in the Northeast picked up this month. However, European markets traded on a positive note on being influenced by robust economic data from both sides of the Atlantic.

Back home, the NSE’s 50-share broadly followed index Nifty, got pounded by over a percent to settle above the psychological 5,300 support level while Bombay Stock Exchange’s Sensitive Index - Sensex slumped over two hundred points and closed below the psychological 17,500 mark. Moreover, the broader markets too settled on a pessimistic note as they succumbed to the selling pressure that was being exerted on their larger peers and plunged around a percent.

The markets dived on extremely large volumes of over Rs 2.40 lakh crore while the market breadth remained pessimistic as there were 1044 shares on the gaining side against 1801 shares on the losing side while 120 shares remained unchanged.

Finally, the BSE Sensex shaved off 209.65 points or 1.19% to settle at 17,466.20, while the S&P CNX Nifty plunged by 62.60 points or 1.16% to close at 5,317.90.

The BSE Sensex touched a high and a low of 17,871.00 and 17,426.58 respectively. The BSE Mid cap and Small cap indices down by 0.68% and 1.12% respectively.

The major gainers on the Sensex were ITC up 3.65%, M&M up by 2.71%, HUL up by 0.59%, Maruti Suzuki up by 0.52%, Coal India up by 0.44%. While Sun Pharma down by 7.09%, ONGC down by 4.66%, Jindal Steel down by 4.23%, NTPC down by 3.82% and Tata Power down by 3.65% were the major losers on the index.

The only gainers on the BSE sectoral space was FMCG up by 1.91% and Auto  down by 0.22% while Oil & Gas down by 3.32%, Power down by 2.98%, Capital goods down by 2.94%, PSU down by 2.63% and Metal down by 2.22% were top losers on the BSE sectoral space.

Meanwhile, finance minister Pranab Mukherjee announced a Rs 1,00,000 crore increase in the agriculture credit target to Rs 5,75,000 for the next fiscal and raised the outlay for farm sector by about Rs3,000 crore. 'Agriculture continues to be a priority to the government. Following are some budget highlights,

The total plan outlay for agriculture and cooperation has been increased by 18% from Rs17,123 crore in 2011-12 to Rs20,208 crore in 2012-13,' Mukherjee said in his Budget speech. · Exemption limit on income tax increased to Rs 2 Lakhs· Upper limit of 20% tax slab raised to Rs 10 lakh· Problem of black money to be addressed.· Focus on domestic demand driven growth recovery.· FY 13 Net market borrowing at Rs 4.79 lakh crore.· STT cut to 0.1%.· Health insurance deduction upto Rs 5000 for preventive health checkup.· Branded silver jewellery fully exempted from customs duty.· Direct tax collection fell short by Rs 32,000 crore in current fiscal

The S&P CNX Nifty touched a high and low of 5,445.65 and 5,305.00 respectively.

The top gainers on the Nifty were ITC up 4.45%, M&M up by 3.43%, Ambuja Cement up by 1.94%, Maruti Suzuki up by 0.92%, HUL up by 0.75%. On the flip side, Sun Pharma down by 7.83%, Cairn down by 6.60%, ONGC down by 5.43%, Siemens down by 4.49%, NTPC down by 4.23% were the top losers on the index.

The European markets were trading in green, as France's CAC 40 was up 0.23%, Britain’s FTSE 100 up 0.33%, while Germany's DAX was up by 0.30%.

Asian markets ended mostly in negative terrain on Friday as investors booked their gains before the weekend, though Japanese stocks rose narrowly to clinch a sixth straight week of gains as technology firms advanced, while Chinese shares rebounded on bargain-buying after two days of losses. However, Hong Kong stocks sagged a day after the Bank of Communications, China's fifth-largest lender, announced it will issue shares to meet requirements for capital adequacy by China's banking regulator.