The reintroduction of long-term capital gains (LTCG) tax in the Budget sent Dalal Street on a selling spree on Friday, as the sensex crashed 840 points (2.3%), its second-sharpest post-Budget day fall ever by points, and closed just a tad above 35K.
"Investors were disappointed with the LTCG tax coming in, over and above the securities transaction tax (STT) (paid on all stock trades)", said Anita Gandhi, whole time director at Arihant Capital Markets.
Besides, investors were also told to pay another 10 per cent tax on distributed income from equity-oriented mutual funds.
Govt has made a decision to impose 10 per cent tax on LTCG for equity and equity-oriented investments for amount exceeding capital gains of Rs 1 lakh. Bond yields rose on fears that the government might not be able to manage the fiscal deficit target, which also affected investor sentiment on the stock market. However, all gains up to 31 January 2018 will be grandfathered.
The BSE Sensex, which had recovered after a 300-odd point dip on Thursday during Finance Minister Arun Jaitley's speech, opened 200 points lower and tumbled through the day till it touched a low of 35,006.41 - a net loss of 900 points. That would make the RBI more cautious when it announces the monetary policy review on Wednesday next week, they said. The target for 2018-19 has been fixed at 3.3 per cent as against the Fiscal Responsibility and Budget Management Act target of 3 per cent.
The government is firmly on course to achieve high growth of 8% plus as manufacturing, services and exports are back on good growth path.
Overseas, Asian shares were mixed.
"In our opinion, global market volatility led by rising bond yields, profit booking (markets had notched one of the best monthly gains before budget) and concerns on deteriorating macro-economic condition were the probable reasons for the market fall", he added.