Markets witness bloodbath as govt hikes STT rate on F&O

Indian equity benchmarks plunged sharply in afternoon deals, amid the ongoing Union Budget announcements by Finance Minister. The government has declared increasing the Securities Transaction Tax (STT) rate on Futures and Options (F&O) from 0.01 percent to 0.02 percent. It also announced raising of long-term capital gains tax (LTCG) on equity to 12.5 per cent from 10 per cent at present while raising short term capital gains tax to 20 per cent from 15 per cent earlier. It also increased the tax exemption limit for LTCG to Rs 1.25 lakh from Rs 1 lakh earlier. Besides, it has kept India’s FY25 capex outlay unchanged at Rs 11.11 lakh crore - the same as was earmarked in February. Traders failed to take support with Chief Economic Advisor (CEA) V Anantha Nageswaran’s statement that private sector investment has been improving after Covid-19 and it is expected to further pick up in the coming months. He also said there was a small slump during the Covid times, however, there is a possibility that they can invest more in machinery and equipment and also in intellectual property products.

On the global front, Asian markets are trading mostly in red as a bleak demand outlook from China dragged down commodity prices and investors turned their attention to U.S. earnings and inflation data. The inflation data could have a significant impact on the outlook for interest rates, with the US Fed currently widely expected to lower interest rates by a quarter point in September. Back home, on the sectoral front, shares of agriculture-related companies were in limelight after Finance Minister Nirmala Sitharaman approved Rs 1.52 lakh crore for agri and allied sectors. Besides, stock related to FMCG sector were trading higher after, Finance Minister Nirmala Sitharaman announced that changes in new tax regime -- Standard deduction proposed to increased to Rs 75,000 from Rs 50,000. 

The BSE Sensex is currently trading at 79713.11, down by 788.97 points or 0.98% after trading in a range of 79561.06 and 80766.41. There were 5 stocks advancing against 25 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell 1.95%, while Small cap index was down by 1.92%.

The few gaining sectoral indices on the BSE was FMCG up by 0.65%, while Capital Goods down by 3.05%, PSU down by 2.88%, Telecom down by 2.80%, Industrials down by 2.78% and Metal down by 2.77% were the top losing indices on BSE.

The top gainers on the Sensex were ITC up by 2.76%, Titan Company up by 2.00%, Hindustan Unilever up by 0.99%, Kotak Mahindra Bank up by 0.29% and Ultratech Cement up by 0.07%. On the flip side, Larsen & Toubro down by 4.42%, Power Grid Corporation down by 3.38%, Tata Motors down by 2.36%, Bajaj Finance down by 2.21% and SBI down by 2.15% were the top losers.

Meanwhile, the Global Trade Research Initiative (GTRI) has said that increasing foreign direct investment (FDI) from China in the domestic market may benefit in the short-term but it risks undermining India's long-term economic security and strategic autonomy. It said dependence on Chinese firms for key manufacturing capabilities could also expose India to supply chain vulnerabilities and geopolitical risks.  

GTRI has said that Chinese firms investing in India may prioritise their own supply chain efficiencies, potentially sidelining local industries and reducing opportunities for home-grown companies to thrive. Additionally, it said there is a risk that the employment generated might not meet expectations if Chinese firms bring in their own managerial and technical staff, limiting the benefits to the local workforce. It said it is crucial for India to develop policies that genuinely support local industry and create meaningful employment opportunities for its population.

It further said while Chinese companies investing in India and exporting to Western markets might seem beneficial in the short term, it risks undermining India's long-term economic security and strategic autonomy. It also said that China is already the largest import supplier for India in each of the eight industrial product categories. Allowing Chinese firms to 'Make in India' risks overwhelming domestic industries, potentially leading to the closure of many Indian businesses and this could transform India from a manufacturing hub into merely a trading nation, dependent on Chinese firms for critical supplies and economic growth.

The CNX Nifty is currently trading at 24142.15, down by 367.10 points or 1.50% after trading in a range of 24141.25 and 24582.55. There were 6 stocks advancing against 44 stocks declining on the index.

The top gainers on Nifty were ITC up by 3.20%, Tata Consumer Product up by 1.37%, Titan Company up by 1.01%, Hindustan Unilever up by 0.62% and Dr. Reddy's Lab up by 0.45%. On the flip side, ONGC down by 5.70%, Shriram Finance down by 5.12%, Power Grid Corporation down by 4.62%, Larsen & Toubro down by 4.54% and Coal India down by 4.28% were the top losers.

Asian markets are trading mostly in red; Hang Seng declined 140.99 points or 0.81% to 17,494.89, Jakarta Composite plunged 1.41 points or 0.02% to 7,320.57, Shanghai Composite weakened 35.78 points or 1.22% to 2,928.44 and Nikkei 225 slipped 4.61 points or 0.01% to 39,594.39.

On the flip side, Straits Times rose 18.96 points or 0.55% to 3,456.22, KOSPI increased 10.78 points or 0.39% to 2,774.29 and Taiwan Weighted added 614.85 points or 2.69% to 22,871.84.