BSE Sensex falls 5.8 pct as budget disappoints

By Janaki Krishnan & Narayanan Somasundaram

MUMBAI (Reuters) - The BSE Sensex fell 5.8 percent on Monday in its biggest drop in six months after the annual budget disappointed investors and raised concerns about the government's finances.

Banks were among the big losers as a higher fiscal deficit and borrowing plan sent bond yields sharply higher, which could hurt treasury income for lenders.

The budget fell short of expectation on infrastructure spending, ignored financial sector reform, raised a minimum alternate tax for companies and set a paltry stake sale target unnerving investors, traders said.

"There is a mismatch between market expectations and what was delivered. There were hopes the government would be bolder, but it has only gone for spending," said Deepak Jasani, head of retail research at HDFC Securities

"On most counts, there are a lot of general statements of intent, without any specific targets or timelines."

The 30-share BSE index ended 5.83 percent lower at 14,043.40, its sharpest fall since Jan. 7 when it slumped 7.25 percent after Satyam Computer Services, now renamed Mahindra Satyam, unveiled a billion-dollar accounting scandal.

It was the lowest close since May 26. The index had risen as much as 1.2 percent early.

The benchmark is still up three-fourths from its 2009 low in early March.