Sensex falls to three-month low; budget stokes inflation, tax worries

MUMBAI Thu Feb 28, 2013 5:50pm IST

1 of 2. Employees walk in a lobby at the Bombay Stock Exchange (BSE) during the announcement of the annual budget in Mumbai February 28, 2013.

Credit: Reuters/Vivek Prakash

Related Topics

Stocks

   

MUMBAI (Reuters) - The BSE Sensex fell on Thursday to three-month low as state-run lenders declined after the government announced a higher-than-expected gross market borrowing target as part of its 2013/14 budget, raising concerns about liquidity in the banking system.

A government proposal to raise taxes on certain individuals and companies also raised concerns, while worries about double tax avoidance agreements also hit shares after the finance ministry said tax residency certificates were no longer sufficient to claim benefits.

(Budget 2013: Chidambaram increases spending, taxes the rich, click here)

(Rich taxpayers to pay 10 percent surcharge, click here)

A perception that the government lacked major initiatives to woo foreign investors added to the disappointment given net inflows from abroad play a key role in share performance.

"Inflationary expectations and tax uncertainty are weighing on the market, but I am sure the finance minister would give clarifications on to avoid any further loss of confidence," said Deven Choksey, managing director, KR Choksey Securities.

The benchmark BSE Sensex fell 1.52 percent, or 290.87 points, to end at 18,861.54, hitting its lowest close since November 27, 2012. It was down 5.2 percent for the month, snapping a three-month gaining streak.

The broader Nifty fell 1.79 percent, or 103.85 points, to end at 5693.05, closing below the psychologically important 5,700 level, and falling 5.7 percent for the month.

Investors expressed broad disappointment over the budget, with incentives such as reducing the securities transaction tax on equity futures and imposing a transaction tax on futures contracts of non-agricultural commodities not seen as big enough to sway investors.

(Budget 2013 highlights, click here)

Shares in public sector banks fell on concerns about liquidity in the banking system after the government set its target for gross market borrowing at 6.29 trillion rupees in 2013/14, above estimates of less than 6 trillion rupees.

State Bank of India fell 6 percent, Punjab National Bank (PNBK.NS) ended 5.5 percent lower, while Bank of India (BOI.NS) fell 5.7 percent.

Private sector lenders also fell, with ICICI Bank (ICBK.NS) down 4 percent, after the finance minister proposed to extend a scheme that provides farmers with low-cost loans to private banks.

A surprise hike in tax on sports utility vehicles hit Mahindra & Mahindra (MAHM.NS), sending the auto maker down 2.1 percent.

Shares of Suzlon Energy (SUZL.NS) slumped 34 percent after its promoters sold a 6.19 percent stake in the open market.

Shares in Adani Ports and Special Economic Zone Ltd (APSE.NS) fell 3.2 percent after the finance minister proposed setting up two new ports in Andhra Pradesh and West Bengal, raising worries about more competition in the sector.

However, among stocks that gained, Indian education-related companies rose after the allocation to the ministry of human resources and development was increased to 658.67 billion rupees.

Everonn Education Ltd (EVED.NS) ended 2.3 pct higher after gaining as much as 15.5 percent earlier.

(Additional reporting by Manoj Dharra; Editing by Sunil Nair)

FILED UNDER:

REUTERS SHOWCASE

WTO Trade Deal

WTO Trade Deal

WTO clinches first global trade deal in its history  Full Article 

Kashmir Attack

Kashmir Attack

Ten dead in Kashmir's worst militant attack in more than a year  Read 

OPEC Meeting

OPEC Meeting

Saudis block OPEC output cut, oil price sinks further.  Full Article 

GDP, RBI Preview

GDP, RBI Preview

GDP growth set to weaken, business wants reforms more than rate cut  Full Article | Related Story 

Social Media

Social Media

Twitter to start tracking users' mobile apps  Full Article 

Jaitley to Rajan

Jaitley to Rajan

Jaitley likely to meet Rajan on Monday to urge rate cut  Full Article 

Banking Sector

Banking Sector

India moves to allow more businesses to offer basic financial services.  Full Article 

Forever21 in India

Forever21 in India

Forever21 sets sights on Indian cities, but please hold the hot pants  Full Article 

Japan Economy

Japan Economy

Japan inflation slows in October, output and spending show signs of recovery  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage