Budget 2024: Stock markets edge down on STT, LTCG hike

Benchmark Sensex and Nifty settled marginally lower in volatile trade on 23 July as the government proposed to hike the securities transaction tax (STT) on futures and options in the Union Budget 2024-25.

Recovering most of its intra-day losses of over 1,200 points, the 30-share BSE Sensex settled lower by 73.04 points or 0.09 per cent 80,429.04. The index gyrated between highs and lows during the day as finance minister Nirmala Sitharaman announced Budget proposals for 2024-25.

The barometer tanked 1,277.76 points or 1.58 per cent to hit a low of 79,224.32 as the minister announced a hike in STT on F&O trade and an increase in long-term capital gains tax on equities. However, tax exemptions and customs duty cuts helped boost consumer durables and FMCG shares, aiding stocks to recover from the day’s lows.

The NSE Nifty dipped 30.20 points or 0.12 per cent to 24,479.05. Intra-day, it dropped 435.05 points or 1.77 per cent to 24,074.20. Among the Sensex pack, Titan jumped over 6 per cent, followed by ITC which surged more than 5 per cent.

Adani Ports, NTPC, Infosys, Hindustan Unilever, HCL Technologies and Sun Pharma were among the other big gainers. However, Larsen & Toubro, Bajaj Finance, State Bank of India, Axis Bank and HDFC Bank were among the major laggards.

"From the markets perspective, the raising of STCG (short-term capital gains) to 20 per cent and LTCG (long-term capital gains) tax to 12.5 per cent is a body blow. We need to brace ourselves for a negative reaction in the short term," Sanjay Sinha, founder, Citrus Advisors, said.

"There was a knee-jerk reaction during the Budget speech as Sensex plunged more than 1,000 points after FM increased LTCG and STCG rates along with higher STT on F&O transactions, which had caught investors off guard.

"However, both key benchmark indices erased almost all of its losses to end marginally lower as the government's focus on lower fiscal deficit, increased spend on infrastructure and focus on rural spending helped calm the nerves of the traders," Prashanth Tapse, senior VP (research), Mehta Equities Ltd, said.

Analysts said domestic investors had high expectations from the budget to increasing revenue and capital expenditure. However, the narrative is mixed, by curtailing expenditure while attaining fiscal prudence, which can limit further growth.

"During the year, the market has fairly factored in ongoing growth and trading at a high premium," Vinod Nair, head of research, Geojit Financial Services, said.

In the broader market, the BSE midcap gauge declined 0.74 per cent while the smallcap index dipped 0.18 per cent.

Among the indices, consumer durables rallied 2.45 per cent, FMCG jumped 2.48 per cent, IT (0.82 per cent), services (0.62 per cent), healthcare (0.59 per cent) and tech (0.56 per cent).

Realty dropped 2.15 per cent, capital goods declined 2.03 per cent, industrials (1.48 per cent), financial services (1.27 per cent), metal (1.02 per cent), commodities (0.51 per cent) and telecommunication (0.51 per cent).

Notably, stock markets had closed higher in the previous three budget days. In 2023, on the Budget day, the BSE benchmark ended at 59,708.08, up by 158.18 points, or 0.26 per cent.

In 2022, the Sensex jumped 848.40 points or 1.46 per cent to settle at 58,862.57 while in 2021, it rallied 2,314.84 points or 5 per cent to 48,600.61 after the Budget announcements.

In 2020, the BSE benchmark fell 987.96 points or 2.48 per cent at 39,735.53 and in the preceding year, it clocked a gain of 212.74 points or 0.58 per cent at 36,469.43.

On February 1, 2023 the broader NSE Nifty declined 45.85 points or 0.26 per cent to 17,616.30. In 2022, the Nifty surged 237 points or 1.37 per cent to end at 17,576.85 on the Budget day.

On February 1, 2021 the Nifty soared 646.60 points or 4.74 per cent to finish at 14,281.20, while on the Budget day, in 2020 the 50-share benchmark plunged 300.25 points or 2.51 per cent to 11,661.85.

On February 1, 2019 the 50-share NSE Nifty jumped 62.70 points, or 0.58 per cent, to close at 10,893.65.

Finance Minister Nirmala Sitharaman on 23 July announced income tax relief for the middle class, a Rs 2 lakh crore outlay for job creation schemes over the next five years and a spending splurge for states run by her party's new coalition partners as she unveiled Modi 3.0 government's first budget after the general elections.

With rural distress and unemployment being blamed for BJP losing its majority, Sitharaman in her seventh straight budget provided Rs 2.66 lakh crore for rural development and maintained spending on long-term infrastructure projects at Rs 11.11 lakh crore to boost economic growth.

The finance minister said the government plans to raise the capital gains exemption limit on certain financial assets to Rs 1.25 lakh per year for the middle and upper middle class.

Presenting the Budget for 2024-25, she announced a hike in STT (Securities Transaction Tax) on F&O (futures and options) securities by 0.02 per cent and 0.1 per cent.

She abolished 'angel tax' for all classes of investors in startups, cut customs duty on mobile phones and gold and simplified capital gains tax.

Foreign Institutional Investors (FIIs) bought equities worth Rs 3,444.06 crore on Monday, according to exchange data.

In Asian markets, Seoul settled higher while Tokyo, Shanghai and Hong Kong ended lower. European markets were trading higher. The US markets ended in the positive territory on Monday. Global oil benchmark Brent crude climbed 0.25 per cent to USD 82.63 a barrel.

Falling for the second day in a row, the BSE benchmark fell 102.57 points or 0.13 per cent to settle at 80,502.08 on Monday. The NSE Nifty dipped 21.65 points or 0.09 per cent to 24,509.25.