Markets witness complete bloodbath on Budget woes

Friday turned out to be an awful day of trade for Indian equity benchmarks, with frontline gauges tumbling below their crucial 10,800 (Nifty) and 35,100 (Sensex) levels, as traders took beating on the back of several announcements made yesterday in his speech by Finance Minister Arun Jaitley during Union Budget 2018. After making a gap-down opening, markets never looked confidant and extended their southward journey to end at day’s lows. The Finance Minister’s proposal to levy long-term capital gains tax (LTCG) on equities investments mainly dampened sentiment. This move may reduce incentive for investors to hold equities for longer term as the difference between tax on short and long term capital gains is only 5%. Besides, the imposition of a fresh tax on income from Mutual Funds could also have spooked investors. Sentiments also remained dampened on report that India’s fiscal deficit, for nine months of Financial Year 2018, stands at Rs 6,20,949 crore, overshooting the budgeted estimate (BE) target by 113.6%. The government has estimated Rs 5,46,532 crore of fiscal deficit for FY18 which during the same period of the last year stood negative at 93.9%.

Markets extended southward journey after Fitch Ratings said that high debt burden of the government constrains India’s rating upgrade, a day after Finance Minister Arun Jaitley projecting a fiscal deficit of 3.5% of GDP against the earlier target of 3.2%. The report enlightened that weak public finances constrain India’s sovereign ratings, given a high general government debt burden of around 68% of GDP and a wide fiscal balance of 6.5% of GDP if states are included. Traders failed to draw any solace with Finance Minister Arun Jaitley’s statement that India’s $2.5 trillion economy is now firmly on course to register a strong growth rate of over 8% and indicated that the country has grown on an average of 7.5% in the first three years of the Modi government.

Weak opening in European markets too dampened sentiments as a slump in Deutsche Bank after a bigger-than-expected loss hit the heavyweight banking sector. Some investors also see signs of a potential market correction as yields continue to go up. Asian markets exhibited mixed trend on Friday, as rising bond yields and mixed earnings from top US companies.

Back home, this year's budget focused more on rural and agri economy and the government is committed to the welfare of the fares. Mid-and small-cap indices lost ground on Friday, as investors booked profit in stocks of these two segments. In scrip specific development, Bajaj Auto declined on reporting lower than expected net profit for the December quarter at Rs 9.52 billion against Rs 9.24 billion Year-on-Year (Y-o-Y). The company’s revenue rose 26% at Rs 63.69 billion against Rs 50.67 billion (Y-o-Y).

Finally, the BSE Sensex tumbled 839.91 points or 2.34% to 35,066.75, while the CNX Nifty was down by 256.30 points or 2.33% to 10,760.60.

The BSE Sensex touched a high and a low of 35,738.13 and 35,006.41, respectively and there were 3 stocks on gaining side as against 28 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index tumbled 4.03%, while Small cap index was down by 4.65%.

The top losing sectoral indices on the BSE were Realty down by 6.28%, Basic Materials down by 3.97%, Utilities down by 3.95%, Power down by 3.94% and Industrials was down by 3.81%, while there were no gainers on the BSE sectoral front.

The few gainers on the Sensex were TCS up by 0.33%, Hindustan Unilever up by 0.10% and Wipro up by 0.05%. On the flip side, Bajaj Auto down by 4.90%, Bharti Airtel down by 4.62%, Maruti Suzuki down by 4.28%, Axis Bank down by 4.28% and Reliance Industries down by 4.07% were the top losers.

Meanwhile, the Telecom minister Manoj Sinha has said that India's telecom sector is likely to generate as many as 4 lakh new jobs and contribute significantly to the country’s Gross Domestic Product (GDP) growth in the next 5 years, as the Union Budget for 2018-19 seeks to enhance telecom infrastructure in the country. He noted that the government has allocated Rs 10,000 crore for expansion of telecom infrastructure under various projects in the country, including laying of 4 lakh kilometres of optical fibre cable (OFC) network to connect 1.5 lakh gram panchayats by March 2019, scaling up wifi networks and connectivity in north- eastern states and laying undersea cable for connecting Andaman and Nicobar Islands (ANI) and Lakshadweep Islands etc.

The minister has stated that the task of connecting one lakh gram panchayats with high speed optic fibre network has been completed under Phase 1 of Bharat Net program. He also said that under phase 2, targeted to be completed by March 2019, the government aims to connect remaining 1.5 lakh GPs with OFC based broadband network. Besides, he said that the budget allocation will be used for setting up 5 lakh wifi hotspots in rural area. He believes that installation of 5 lakh hotspots will increase wifi hotspots by 15 folds in the country. He added that at present, there are 38,000 public wifi hotspots.

Sinha has stated that enhance connectivity will help Department of Posts (DoP) to expedite direct benefit transfer scheme being handled by it and enhance role of India Post Payments Banks, which will be launched in March-April. He also pointed out that DoP plans to increase passport seva kendra from 60 to 251 in this calendar year. He said that provision for installing electronic system at tolls will enhance roll of telecom ministry and Make in India programme. Adding further, he highlighted that India has emerged as one of very strong telecom market with 1,186 million phone connections out of which 1,163 million are mobile phones, tele-density has reached around 91 percent and internet user base increased from 422.81 million at the end of march and to 429.23 million in September.

The CNX Nifty traded in a range of 10,954.95 and 10,736.10. There were 5 stocks in green as against 45 stocks in red on the index.

The top gainers on Nifty were Tech Mahindra up by 0.99%, HCL Tech up by 0.64%, TCS up by 0.46%, Infosys up by 0.06% and Hindustan Unilever up by 0.05%. On the flip side, Ultratech Cement down by 5.77%, Bajaj Finance down by 5.58%, Bajaj Auto down by 5.21%, GAIL down by 4.70% and Indiabulls Housing Finance down by 4.70% were the top losers.

European markets were trading in red; Germany’s DAX declined 138.65 points or 1.07% to 12,865.25, France’s CAC decreased 61.29 points or 1.12% to 5,393.26 and UK’s FTSE 100 was down by 21.02 points or 0.28% to 7,469.37.

Asian equity markets ended mixed on Friday as rising bond yields and mixed earnings from top US companies helped induce some caution ahead of the closely-watched US monthly jobs report for January, due later in the day. Japanese shares fell, dragged down by banks after the Bank of Japan upped bond purchases as part of efforts to prevent bond yields from rising. Meanwhile, Chinese stocks reversed initial losses to end higher as investors looked ahead to the release of January trade and inflation numbers due next week for further clues on the economic outlook.