Union Budget 2013: Surcharge singes sensex

MUMBAI: Dalal Street gave a thumbs-down to the Budget proposals with the sensex diving 291 points to close below the psychologically important 19,000 level as FII nervousness and a new surcharge on India Inc spooked investors. Jittery about the government’s likely intention to look into the origin of money flowing into the Indian stock market from tax havens like Mauritius, foreign funds sold heavily even as most market players accepted that other Budget proposals can fire the economy again provided they are implemented properly. BSE data showed that FIIs net sold stocks worth about Rs 1,300 crore, the highest single session net outflow in over three months.
As a result, the sensex closed at 18,862, its lowest close in 2013 and investors were left poorer by Rs 1.26 lakh crore with BSE’s market capitalization now at Rs 65.2 lakh crore. The expiration of February derivatives contracts on Thursday also added to the market’s disappointment.
However, the total turnover of the three exchanges together – NSE, BSE and MCX-SX – was at an all-time high at about Rs 4.4 lakh crore, suggesting high trading volumes.
“The Budget targets look a bit difficult to achieve,” said Anand Tandon, CEO, JRG group, a domestic brokerage house. The main concerns, however, were related to the marginal hike in corporate taxes and some changes in tax treatment related to NPA recognition by banks. “Together these two can pull down corporate profits and hence the earnings estimates of sensex companies by a couple of percentage points,” Tandon said.
For the Street, the biggest positive was the FM’s restraint on populism ahead of an election year, said Raamdeo Agrawal, joint MD, Motilal Oswal Financial Services. “The market sell-off was the result of no big bang reforms announcement, which incidentally had come in during the run up to the Budget,” he said.
For the FIIs, which have again taken a cautious stance, the aggressive growth and revenue targets were points of concern. “It’s a balanced Budget but FIIs have some concerns on how the aggressive targets and GDP projections would be met,” said Vikas Khemani, president & head, institutional equities, Edelweiss Financial Services.
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