Indian markets aren’t excited because budget does not have the ‘stimulus’ they had hoped for

• Both Sensex and Nifty declined nearly a percent and half as Finance Minister Nirmala Sitharaman read her budget speech.
• Markets were hoping for a big stimulus from the government to revive the economic growth which has hit a six and a half year low.
• Changes to income tax slabs, passing of the tax on corporate dividends, liberalisation of education sector, the IPO of LIC, extended tax holiday for affordable housing were among the big proposals.

India's stock markets were unusually open on a Saturday, in anticipation of an 'economic stimulus', but as Finance Minister Nirmala Sitharaman went through with her speech, both Sensex , down nearly 700 points, and Nifty that was down about 220 points at 2:30 pm.

Changes to income tax slabs, passing of the tax on corporate dividends, liberalisation of education sector, extended tax holiday for affordable housing, and the initial public offering of Life Insurance Corporation (LIC) were among the big proposals. However, the stock market did not seem very excited with the minister's proposals.

"Investors stayed away from taking fresh positions ahead of the big event. Focus will turn to the Union Budget as all eyes will be on how Centre is going to bring growth as any increase in spending would result in widening of fiscal deficit. Global economy is also on the edge with slow growth fears significantly high after the outbreak of the virus," Vinod Nair, head of research at Geojit Financial Services told IANS earlier in the day.

Insurance stocks like HDFC Life, ICICI Prudential, and SBI Life took a heavy beating, down anywhere between 5% and 8%, after the budget proposed the listing of LIC ⁠— the country's largest insurance giant with a corpus of ₹31 lakh crore⁠— that is likely to corner a lot of interest from investors.

Technology stocks were propped up as the early part of Sitharaman's speech gave a lot of thrust to leveraging technology in a whole host of sectors from health and education to quantum computing and gene mapping.

Even stocks like HUL, Asian Paints, and Bajaj Finance, which started the day on buoyant note hoping for sharp cuts in income tax and a boost for consumption including housing, gave up the early gains as the tax cuts proposed by the budget can be availed only if the taxpayer gives up on exemptions.


While Sitharaman said that a person earning up to ₹15 lakh a year can save up to ₹78,000 a year in taxes, if they give up on exemptions.

These are some of the big highlights that are relevant to the share market:

Cost to the exchequer ₹40,000 crore; Removed 70 tax exemptions and deductions. These new rates are available to those who forego exemptions, deductions, and rebates.

Dividend distribution tax will be abolished, it will be taxable in the hands of the recipient. Cost to exchequer: ₹25,000 crore. ""The decision to remove dividend distribution tax was much-needed as it was resulting in triple taxation of corporate earnings. The shift to a simplified scheme of personal income tax is another welcome move as it removes distortionary influences in the individual’s savings choices even though the actual tax savings may not be significant for those who were availing deductions and exemptions," VP Nandakumar, MD & CEO of Manappuram Finance Limited said. However, the stock of the company fell over 3.2% in trade.

Shares of IDBI Bank surged as much as 17% after the Finance Minister said that the government will sell its remaining 47% stake (as of December 2019) in the bank. LIC owns 51% stake in IDBI Bank, the unlocking of value will make the insurance giant's IPO even more valuable.

Zeal Aqua (up 14.4%), Waterbase (up 5.58%), Apex Frozen (up 4.55%), Avanti Feeds (up 2.93%) and Coastal Corporation (up 2.66%) gained due to a dedicated push for the fishing industry. Sitharaman said that the fish production will be increased 200 lakh tonnes a year and set a target of ₹1 lakh crore in fish exports.

The education sector has been allowed to borrow money from abroad as well as to invite foreign students via a new entrance examination called the INDSAT. Shares of Navneet Education (up 2.33%), Zee Learn (up 2.19%), Career Point (up 1.98%) and MT Educare (up 1.97%), gained in trade.

The speech discouraged the use of chemical fertilisers, and promote organic farming, dragging down stocks like Rashtriya Chemical Fertilisers. The ₹2.83 lakh crore allocation for agriculture, irrigation, and rural development did little to stokes of a revival in rural demand.

Dividend distribution tax will be taxable in the hands of the recipient and not the company. This will cost 25,000 crore to the exchequer. Dividend and capital gains made by foreign funds on investment in infrastructure space will tax free.

The budget also proposed to set up a 100 new airports in the next five years but stocks of airport construction majors like GMR Infra and GVK were down nearly 5% in afternoon trade.





SEE ALSO:
You'll save ₹78,000 more under new income tax slabs if you earn less than ₹15 lakh

Indian government infuses ₹22000 crore in power and renewable, proposes freedom to choose supplier

New income tax slabs 2020

“There will be no manual cleaning of sewers anymore,” announces Nirmala Sitharaman

Union Budget 2020 Live Updates