Sensex falls over 900 points on Monday; shares muted over lack of vision in Budget

The stock markets fall sharply on Monday with the benchmark BSE Sensex with 793 points, or two per cent, its biggest single-day loss in the year 2019 so far.

Modi government’s move to tax share buybacks, raise tax on the super rich and hike minimum public shareholding in listed companies further disappointed domestic investors.

Sensex plunged 907 points in the intra-day trade before closing at 38,720.57 points with a loss of 792.82 points. It takes the total loss to 1,188 points after the Budget presentation. NSE tanked 252.55 points, or 2.14 per cent, to close at 11,558.60 points.

Global shares were in a muted mood Monday after strong US job gains tempered expectations that the Federal Reserve will deliver a large rate cut.

Benchmark index had lost over 1,100 points after Friday’s Budget. Modi’s government’s move to tax share buybacks and hike minimum public shareholding in listed companies are among the reasons that have impacted domestic investor sentiment.

According to a report in The Indian Express, analysts said the government’s proposal to raise the tax burden on the ultra-rich could also affect foreign funds that are legally equivalent to Associations of Persons (AoP), a class of income earners required to pay more taxes after new liability slabs were created in the Budget. There were no immediate measures in the Budget that could kickstart consumption and related economic activities, they said.

Investors’ wealth has fallen by over ₹5.61 lakh crore after the presentation of the Budget Friday, when the Sensex dropped 395 points. On Monday, July 8, market capitalisation declined by ₹3.39 lakh crore. The fall was across the board with the mid-cap index falling 1.99 per cent and small-cap index 2.46 per cent. All the sectoral indices ended in the red, with BSE capital goods, realty, auto, power, industrials, finance, bankex, oil and gas, utilities and metal index falling up to 3.78 per cent.

Selloff was partly on account of US job growth data, which showed a strong rebound in June. This is a dampener to expectations of aggressive rate cuts by the US Fed, which was being anticipated earlier. This had prompted a sell-off across Asia, with MSCI’s broadest index of Asia-Pacific shares outside Japan losing 1.4 per cent. The Shanghai Composite Index fell 2.6 per cent while Tokyo’s Nikkei 225 lost one per cent. Hong Kong’s Hang Seng retreated 1.5 per cent and Seoul’s Kospi declined 2.2 per cent.

As many as 1,174 companies out of over 4,700 listed companies will have to sell shares to reduce the public holding to 65 per cent. At the current market prices, the total quantum of sale that needs to be done by these 1,174 companies works out to ₹3,87,000 crore. This will include the Indian arms of multinational companies and IT companies.