Post Session: Quick Review

Day after budget, Indian benchmarks continued to witnessed downward trend as government’s decision to raise tax on gains from equity investments continued to dent investor’s sentiments. Foreign fund outflows and a weak trend in global markets also played spoil sport for the domestic markets. Investors now shifted their focus on Q1FY25 earnings. Sector wise, banking sector stocks were on the priority list of the sellers. However, the broader indices, the BSE Mid cap index and Small cap index ended in green.

Markets made negative start and turned volatile tracking weakness in global peers. Foreign institutional investors (FIIs) net sold shares to the tune of Rs 2,975.31 crore in the cash market on July 23. Some cautiousness came as an analyst at Moody's Ratings said India's fiscal deficit glide path set out for 2025-26 is reasonable, but a coalition government at the Centre may pose challenges to pass bigger reforms that the economy needs. Traders overlooked Karun Rishi, president of USA India Chamber of Commerce stated that the future ready budget presented by Union Finance Minister Nirmala Sitharaman aims to realize the vision of Viksit Bharat by raising spending to generate more jobs and spur economic growth. The finance minister has maintained fiscal discipline, with a commendable reduction in the fiscal deficit target to 4.9% of GDP for FY25, down from the 5.1% target in the interim budget. In afternoon session, indices added more losses to trade at day’s low levels, as traders sold out their riskier assets. Sentiments were downbeat as Central Board of Indirect Taxes and Customs (CBIC) Chairman Sanjay Kumar Agarwal said that though the Union Budget proposed to review the customs levies over the next six months for inverted duty correction, it will be a difficult task in many cases because of nil rate on some items under free trade agreements (FTAs). However, in last leg of trade, markets pared some of trade losses and ended in red. 

On the global front, European markets were trading lower dampened by luxury stocks after dour results from LVMH weighed on sentiment, and as a raft of lacklustre corporate earnings added to the sombre mood. Asian markets ended lower after lacklustre earnings from U.S. tech behemoths Tesla and Alphabet dented risk appetite. Traders watching out for an inflation reading on Friday and Federal Reserve meeting next week. Back home, Finance Minister in budget announced overall outlay for the Ministry of Tribal Affairs is about Rs 13,000 crore, marking a significant increase of 73.60% over the previous year’s Revised Estimate (RE).

The BSE Sensex ended at 80,148.88, down by 280.16 points or 0.35% after trading in a range of 79,750.51 and 80,519.58. There were 10 stocks advancing against 20 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index gained 0.68%, while Small cap index was up by 1.91%.(Provisional)

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.69%, Energy up by 1.60%, Utilities up by 1.31%, Telecom up by 1.24% and Power was up by 1.24%, while Bankex down by 0.96%, FMCG down by 0.23% and Auto was down by 0.16% were the few losing indices on BSE. (Provisional)

The top gainers on the Sensex were Tech Mahindra up by 2.71%, NTPC up by 2.67%, Tata Motors up by 2.48%, Sun Pharma up by 1.08% and Power Grid up by 0.85%. On the flip side, Bajaj Finserv down by 2.43%, Bajaj Finance down by 1.81%, Hindustan Unilever down by 1.80%, Kotak Mahindra Bank down by 1.43% and SBI down by 1.35% were the top losers. (Provisional)

Meanwhile, in a big relief to startups, Commerce and Industry Minister Piyush Goyal has said that removal of angel tax for all classes of investors will help attract investments in the segment and further promote the growth of budding entrepreneurs. The move would mainly help emerging sectors like deeptech, artificial intelligence, clean energy, among others, which require a large amount of capital at an early stage.

Angel tax (income tax at the rate of 30 per cent) refers to the income tax that the government imposes on funding raised by unlisted companies, or startups, if their valuation exceeds the company’s fair market value. Goyal said ‘It will further strengthen the startup ecosystem of the country. It was a long-pending demand of the industry. It will help attract investments.’ He added ‘I am quite sure that, it (the decision) will take care of everybody’s interest’.

Section 56(2)(viib) of the Income Tax Act provides that the amount raised by a startup in excess of its fair market value would be deemed as income from other sources and would be taxed at 30 per cent. Touted as an anti-abuse measure, this section was introduced in 2012. It is dubbed as ‘angel tax’ due to its impact on investments made by angel investors in startup ventures. Earlier also, the government has made several amendments to make this tax regime more conducive for investors and startups. A change was made under the Finance Act 2023 proposed to include investments from foreign investors or non-residents within the scope of the angel tax with effect from April 2024. As on date, about 1.44 lakh startups are recognised by the DPIIT.

The CNX Nifty ended at 24,413.50, down by 65.55 points or 0.27% after trading in a range of 24,307.25 and 24,504.25. There were 19 stocks advancing against 31 stocks declining on the index. (Provisional)

The top gainers on Nifty were HDFC Life Insurance up by 4.48%, BPCL up by 2.92%, Tech Mahindra up by 2.67%, NTPC up by 2.65% and Tata Motors up by 2.59%. On the flip side, Bajaj Finserv down by 2.45%, Tata Consumer down by 2.04%, Britannia down by 1.94%, Axis Bank down by 1.90% and Bajaj Finance down by 1.78% were the top losers. (Provisional)

European markets were trading lower; UK’s FTSE 100 decreased 18.49 points or 0.23% to 8,148.88, France’s CAC fell 79.32 points or 1.05% to 7,519.31 and Germany’s DAX was down by 138.61 points or 0.75% to 18,419.09.

Asian markets ended mostly lower on Wednesday tracking Wall Street’s fall overnight and after the release of disappointing earnings from Tesla and Alphabet. Investors were awaiting the US GDP and inflation data for additional clarity on whether the Federal Reserve will cut interest rates this year. Meanwhile, lingering concerns over slowing economic growth in China also kept investors nervous. Japanese shares led regional losses due to the yen’s continued rally and caution ahead of a Bank of Japan policy decision next week. Seoul shares declined, followed by losses in the auto and tech sectors. Taiwan market was closed as Typhoon Gaemi lashed Manila.