July 8, 2019 / 4:48 AM / 3 months ago

Indian shares battered by budget outcome, global rout

* Both NSE and BSE down over 1%

* Maruti stocks hit over 2-yr low

* PNB tumbles after flagging borrowing fraud

By Chandini Monnappa

July 8 (Reuters) - Indian stock markets fell on Monday, in line with broader Asia on strong U.S. jobs data, while the government’s move to tax share buybacks and increase minimum public shareholding in listed companies disappointed domestic investors.

On Friday, Finance Minister Nirmala Sitharaman proposed in the Union budget increasing the minimum public shareholding in listed companies to 35% from 25%, threatening a wave of new issuance.

The broader NSE index was down 1.04% at 11,688.35 as of 0420 GMT, while the benchmark BSE index was trading 1.05% lower at 39,101.06. Of the 50 stocks on the NSE index, 43 were trading in the red.

Sentiment in broader Asia was negative too on Monday with MSCI’s broadest index of Asia-Pacific shares outside Japan inching over 1% lower after strong U.S. jobs data tempered expectations for a Fed rate cut.

In India, the auto index was trading over 2% lower after the government in the budget lowered goods and services tax (GST) on electric vehicles to 5% from 12% and raised basic customs duty on auto parts.

Shares of Hero MotoCorp Ltd and Maruti Suzuki India Ltd were among the top losers on the NSE index. Maruti shares were down as much as 3.36%, their lowest since April 2017, while Hero Moto shares hit their lowest level since September 2015.

“The markets are voicing their disappointment in the lack of anything in the budget for the consumer. A fair amount of the investor community is disappointed with the budget and there will likely be short-term money exiting the market,” said Sunil Sharma, chief investment officer, Sanctum Wealth Management.

The government also unexpectedly trimmed its fiscal deficit target to 3.3% from 3.4% for this year in a bid to revive a stagnating economy and said some of its borrowing would be made offshore.

Important indicators of economic activity, like the dipping index of industrial production and plummeting automobile sales have confirmed a slowdown in the country’s economy.

“The government is choosing fiscal conservatism, everything now falls on monetary policy and more rate cuts and that will eventually lead to a recovery probably by the end of the year,” Sharma added.

Shares of Punjab National Bank (PNB) fell as much as 8.19% after the state-owned lender said it had flagged a borrowing fraud of 38.05 billion rupees ($554.83 million) in Bhushan Power & Steel Ltd’s account to the country’s central bank.

The country’s IT index, which fell after Friday’s budget announcement, was trading nearly 1% lower. Shares of Tata Consultancy Services Ltd were down as much as 1.43%- lowest in over 5-weeks. The IT services company is scheduled to post first quarter results on Tuesday.

$1 = 68.5800 Indian rupees Reporting by Chandini Monnappa in Bengaluru; Editing by Rashmi Aich

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