MUMBAI (Reuters) - Indian shares fell 1.4 percent on Friday to their lowest close this week, after the national budget budget failed to cheer investors already shaken by turbulent global markets.
The government promised higher spending for ailing farms and pledged funds for rural revival in the 2008/09 budget, but a $15 billion scheme to waive loans and plans to raise the tax on short-term capital gains weighed on the markets.
The benchmark 30-share BSE index ended down 1.38 percent, or 245.76 points, at 17,578.72 in choppy trade after falling as much as 3.2 percent at one stage. Twenty-one components closed in the red.
"The budget lacks teeth because there are no major reform
initiatives on the plate, which were put up in the earlier years," said Jigar Shah, head of research at KIM ENG Securities' Indian unit.
The budget raised short-term capital gains tax, when an investment is sold for profit before one year, to 15 percent from 10 percent. The move could affect day traders, or people who look for quick gains.
However, duty cuts on automobiles could help some sectors to
recover, analysts said.
"I feel the markets are headed up," said R. Rajagopal, chief
investment officer at DBS Cholamandalam Asset Management. "It will be a function of money flow and when the valuations are quite attractive."
For the week, the index was up 1.3 percent. But it slipped 0.4 percent in February, extending losses to 13.4 percent this year and is 17 percent below a record high of 21,206.77 hit on Jan. 10.
Reliance Industries, India's most-valuable firm and top petrochemicals maker, fell 3.1 percent to 2,458.25 rupees, after the government imposed a 5 percent import duty on naphtha, used to make polymers.
Larsen & Toubro, India's top engineering firm, fell 3.2 percent to 3,523.05 rupees, as the government did not announce any "big bang" infrastructure project, a trader said.
Infosys Technologies fell 3.3 percent to 1,546.85 rupees after it said its taxes would go up to 22 percent in 2010/11 from about 15 percent as a 10-year tax holiday is expected to end in March 2009.
These three stocks together account for more than 28 percent of the main index.
Banks shares initially fell sharply after the finance minister proposed to waive $15 billion of loans to farmers, but then pared losses when it became evident the government would pick up most of the bill.
ICICI Bank closed 1.1 percent lower at 1,090.95 rupees, recovering from a low of 1,050, while the BSE bank index ended 0.4 percent up, reversing a loss of 3.8 percent.
In the broader market, 1,628 losers outpaced 1,064 gainers on
volume of 352.8 million shares.
The 50-share NSE index fell 1.17 percent to 5,223.50.
Elsewhere in the region, Karachi's 100-share index slid almost 1 percent to 14,934.30, while Colombo's All-share index fell 0.36 percent to 2,530.86.
* IFCI Ltd rose 6.9 percent to 66.90 rupees after the budget allocated 4.33 billion rupees to restructure the state-run lender its liabilities.
* Consumer goods makers rose on proposals to do away with excise duty on packaged foods such as tea and coffee, from 16 percent now. Hindustan Unilever Ltd rose 3.3 percent to 227.35 rupees, also helped by a proposal to halve the tax on water purification systems to 8 percent.
* Shares in vehicle makers who are stepping up their presence in the defence sector rose after the finance minister proposed a 10 percent increase in defence spending for 2008/09.
Shares in Mahindra & Mahindra Ltd, the top utility vehicle and tractor maker, were up 1.9 percent at 692.80 rupees, while Ashok Leyland Ltd gained 4.2 percent. Tata Power, which also supplies equipment to the armed forces, rose 1.2 percent to 1,401.10 rupees.
* Nagarjuna Fertilisers & Chemicals on 35.9 million shares
* Reliance Petroleum 19.3 million shares
* IFCI Ltd on 17.2 million shares
Additional reporting by Hiral Vora