Sensex sheds 246 points in choppy trade as FM hikes short term capital gains tax

Volatility on the stock market is common on the day of presentation of Union Budget. And it was no exception this time. A strong intra-day rebound was witnessed in mid-afternoon trade today after a steep fall in early afternoon trade. However, the recovery proved short lived as the market failed to sustain higher level in late trade. The market ended with modest losses for the day. 21 out of 30 Sensex stocks declined.

Sensex had tumbled more than 500 points in early afternoon trade soon after the finance minster (FM) P Chidambaram announced a hike in short term capital gains tax on sale of shares to 15% from 10%, in Union Budget 2008-09 which he tabled in parliament today.

Just before the announcement of hike in short term capital gains tax by the finance minster, the market had recovered from lower level after an intial fall triggered by announcement of populist measures in the Budget viz. a major debt waiver package to the farmers. The market had opened in the red and remained subdued in early trade before FM's Budget speech, tracking weak global markets.

The 30-share BSE Sensex declined 245.76 points or 1.38% at 17,578.72. Sensex hit a low of 17,258.20 in afternoon trade. At the day's low, Sensex lost 566.28 points. Sensex hit a high of 17,779.54 in early trade. At the day's high, Sensex lost 44.94 points.

S&P CNX Nifty fell 61.6 points or 1.17% to 5,223.50.

Capital goods and IT stocks fell. Auto stocks rose. The market breadth was weak.

There was no change in corporate tax and the rate of Securities Transaction Tax (STT), too, was kept unchanged, in Union Budget 2008-09. The finance minister said STT paid by the taxpayer will be treated like any other deductible expenditure against business income.

The general Centvat on all goods has been reduced to 14% from 16%. The peak customs duty was kept unchanged at 10%.

The Finance Minister (FM) announced changes in personal income tax slabs that will bring down tax liability of individual tax payers substantially. With an eye on parliamentary elections in 2009, FM also announced a package of a massive Rs 60000 crore of waivers of loans of farmers.

Market breadth was weak: on BSE 1,638 stocks declined as compared to 1,070 stocks that advanced. 42 stocks remained unchanged.

BSE clocked a turnover Rs 6700 crore today 29 February 2008 compared to Rs 5,028.03 crore on Thursday 28 February 2008.

Nifty March 2008 futures were at 5140.10, at a huge discount of 83.40 points as compared to spot closing of 5223.50.

The NSE's futures & options (F&O) segment turnover was Rs 49,083.49 crore, which was lower than Rs 61,065.26 crore on Thursday, 28 February 2008.

India's wholesale price index (WPI) rose 4.89 % in the 12 months to 16 February 2008 over the same period last year, higher than the previous week's rise of 4.35 %, government data showed today.

The BSE Mid-Cap index declined 0.41% to 7,680.39 and BSE Small-Cap index fell 0.41% to 9,628.13. Both these indices outperformed Sensex.

BSE Consumer Durables index (down 2% to 4,699.34 BSE IT index (down 2.65% to 3,862.45), BSE PSU index (down 0.18% to 8,484.16) BSE Power index (down 2.06% to 3,670.94), BSE Capital Goods index (down 2.89% to 16,119.52), BSE Realty index (down 2.72% to 9,565.67) underperformed Sensex.

BSE Oil & Gas index (down 1.19% to 11,032.16), BSE Metal index (down 1.37% to 16,739.52), BSE HealthCare index (up 0.08% to 3,928.78), BSE Auto index (up 1.19% to 4,887.17), BSE Bankex (up 0.4% to 10,113.73), and BSE FMCG index (up 0.91% to 2,274.39) outperformed Sensex.

Capital Goods stocks declined. Larsen & Toubro (down 3.24% to Rs 3,523.05), Bharat Heavy Electricals (down 1.79% to Rs 2,282) and Suzlon Energy (down 5.67% to Rs 281.30) edged lower.

Software stocks fell after after the Finance Minister did not announce any relief for the export-driven sector. Infosys (down 3.29% to Rs 1,546.85), Satyam Computer Services (down 2.83% to Rs 434.15), Wipro (down 2.64% to Rs 434.65) and Tata Consultancy Services (down 0.62% to Rs 874.30) edged lower.

Maruti Suzuki rose 3.86% to Rs 867.20 after government reduced excise duty on small cars to 12% from 16%. Government cut excise duty on hybrid cars to 14%, from 24%. Farm equipment maker Mahindra & Mahindra rose 1.86% to Rs 692.80 after the Finance Minister proposed higher farm credit target.

Bajaj Auto rose 2.73% to Rs 2,280.15 after the Government cut excise duty on two-wheelers to 12%, from 16%.

DLF (down 3.08% to Rs 780.55) and Reliance Industries (down 3.09% to Rs 2,458.25) edged lower from the Sensex pack

All major PSU Banks recovered on television reports the Indian government would reimburse the PSU banks for its Rs 60,000 crore loan waiver for farmers over a period of three years. State Bank of India rose 3.43% to Rs 2,109.70 and Punjab National Bank rose 3.48% to Rs 604.15.

Earlier in the morning the Finance Minister's announcement of a complete waiver of loans for small and marginal farmers with agricultural holding of 1-2 hectors of area, had spooked PSU banking shares with exposure to the rural sector. Meanwhile, Finance Minister has withdrawn Banking Cash Transaction Tax (BCTT) effective from 1 April 2009.

Stocks of the paper manufacturing firms were mixed. The Finance Minister proposed a reduction in excise duty on paper products. J K Paper (down 1.25% to Rs 39.90) and Tamil Nadu Newsprint & papers (down 0.33% to Rs 104.65) edged lower. However, Ballarpur Industries was flat at Rs 136.90 and West Coast Paper rose 0.06% to Rs 80.05. Finance Minister proposed that excise duty will be reduced on paper, paper board and articles made therefrom manufactured out of non-conventional raw materials by units not having an attached bamboo/wood pulp making plant from 12% to 8%.

Ashok Leyland moved up 4.17% to Rs 37.45 after the Finance Minister proposed a reduction in excise duty on buses and their chassis to 12% from 16%, in Union Budget 2008-09.

Sesa Goa spurted 6.69% to Rs 3,464.20 after the finance minister in Union Budget 2008-09 did not increase export duty on iron ore.

Some healthcare stocks gained after government proposed a reduction in excise duty on all pharmaceutical goods to 8%, from 16%. Dishman Pharmaceuticals (up 5.96% to Rs 291.40), Apollo Hospitals (up 1.27% to Rs 495.65), Cadila Healthcare (up 3.02% to Rs 260.80), Fortis Healthcare (up 7.44% to Rs 85.25), Aurobindo Pharma (up 6.37% to Rs 329.75), Cipla (up 0.58% to Rs 207.25), moved up. Ranbaxy Laboratories rose 0.27% to Rs 445.75.

The Finance Minister also proposed a five year tax holiday for setting up hospitals in tier II and tier III regions for providing healthcare in rural areas from 1 April 2008.

Shares of four companies related to power transmission & distribution sector were mixed after the Budget announced plans for a national fund for the segment. Power Grid Corporation of India (down 1.57% to Rs 109.70), Kalpataru Power (down 0.86% to Rs 1244.05) edged lower. However, KEC International (up 0.42% to Rs 728.40) and Jyoti Structures (up 0.86% to Rs 205.75) edged higher. The Finance Minister has proposed Rs 800 crore for accelerated power reforms in FY 2009

Shares of five fertiliser firms slipped between 0.24% to 8.7% after Union Budget 2008-09 did not increase subsidy to producers, as expected. Tata Chemicals (down 0.24% to Rs 329.40), Rashtriya Chemicals and Fertilisers (down 4.73% to Rs 84.60), National Fertilizers (down 4.8% to Rs 66.40), Deepak Fertilisers (down 8.7% to Rs 131.25), and Coromandel Fertilisers and Chemicals (down 4.91% to Rs 127.75), edged lower. The government has announced a loan waiver scheme for small farmers, instead of increasing subsidy to producers.

Stocks of the companies that cater to education sector ended mixed after the Finance Minister said the government aims to provide more thrust to the education sector. Navneet Publications India rose 1.97% to Rs 121.35. However Educomp Solutions (down 2.56% to Rs 4250.85), Camlin (down 4.47% to Rs 234) edged lower. Finance Minister P Chidambaram proposed to set up 16 central universities in 2008-09. He also plans to allot more for education, especially at the primary school level. FM proposed 20% hike in education budget this year from Rs 28,674 crore to Rs 34,400 crore.

Nagarjuna Chemicals & Fertilisers clocked a highest volume of 3.58 crore shares on BSE. Reliance Petroleum (1.92 crore shares), IFCI (1.72 crore shares), Chambal Fertilisers and Chemicals (1.49 crore shares) and Reliance Natural Resources (1.33 crore shares) were other volume toppers in that order.

Reliance Petroleum clocked highest turnover of Rs 328.39 crore on BSE. Relaince Industries (Rs 251.55 crore), OnMobile Global (Rs 247.28 crore), State Bank of India (Rs 246.36 crore) and Essar Oil (Rs 245.63 crore) were other turnover toppers in that order.

FM announced a complete waiver of loans for marginal farmers owning land up to one hectare and small farmers owning land up to 1 and 2 hectares. Agricultural loans given by scheduled commercial banks, regional rural banks and co-operative credit institutions up to March 31, 2007 and due for 31 December 2007 that year will be covered under the waiver scheme to address the problem of indebtedness of farmers.

FM said keeping inflation under check is a cornerstone of government policy. He further said pressure on domestic prices is from food articles and the Government is determined to be self-sufficient in food grains. There is a need to manage capital inflows more actively he added.

The Finance Minister (FM) said India has recorded 8% GDP in 12 consecutive quarters.

Agriculture credit doubled in first 2 years of the UPA government, FM said. Agriculture is expected to grow at 2.6% in FY 2008, he said.

He said capital inflows are excess of economic deficit. Government and Reserve Bank of India will jointly take temporary steps to manage capital inflows, the Finance Minister added.

Indian economy, like all developing economies, is being hurt by these global upheavals in prices. We need to be vigilant and be proactive to change our policies, to counter this global problem, FM said. The rise in global oil prices too has hurt us, say the FM.

The FM plans to allot more for education, especially at the primary school level. FM wants India to be a knowledge society. FM said allocation for Bharat Nirman will be raised to Rs 31,280 crore.