Budget fails to impress Indian share markets

Finance Minister Pranab Mukherjee’s budget proposals yesterday failed to enthuse investors and a benchmark index for Indian equities markets closed nearly 210 points lower.The Indian rupee meanwhile rose the most in a week on speculation gold imports will slow after the government increased tariffs on the metal, helping rein in the nation’s current-account deficit.The 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE), which opened at 17,656.81 points, closed at 17,466.2 points, down 209.65 points or 1.17%, from its previous close at 17,675.85 points.The 50-scrip S&P CNX Nifty of the National Stock Exchange also closed lower at 5,317.9 points, down 1.16% from its previous close. Broader markets also ended in the red with the BSE 500 index closing 1.2% lower.FMCG stocks were the only major gainers, while oil and gas, power and capital goods closed lower. Among capital market reforms, the finance minister said he would allow foreign investors in Indian corporate debt markets this year, while simplifying the process of subscribing to shares through the initial public offering route.Assuring further liberalisation of capital markets, he also announced a new equity savings scheme to extend income tax deduction of 50% to those who invest up to Rs50,000 in equities and whose annual income is less than Rs10 lakh.The finance minister also proposed to reduce the security transaction tax (STT) from the existing 0.125% to 0.1%Among major losers in yesterday’s trade were ONGC, down 5.34% at Rs271.35; SBI, down 2.88% at Rs2,233.30; RIL, down 2.73% at Rs776.25 and L&T, down 2.56% at Rs1,328.10.“Provisions like reduction in securities transaction tax, tax exemption under Rajiv Gandhi equity scheme, increase in raising the limit of tax free bonds to Rs60,000 crore, increase in personal taxation exemption limit are some very welcome steps,” said DK Aggarwal, chairman and managing director, SMC Investments and Advisors.Aggarwal said these proposals would leave more disposable income in the hands of investors increase their participation and boost the capital market.But at the same time an increase in excise duty from 10 to 12% and a hike in service tax from 10 to 12% brought negative sentiments in the markets.In the last hour of trade, the Sensex fell 249 points to a low of 17,426.58 points. The Nifty too slipped 1.4% at 5,305 points.The Indian currency pared a weekly loss as the customs duty on gold bars and coins was doubled to 4% and the excise duty on refined gold to 3%. The rupee also gained after the government eased taxes on overseas borrowings by local companies, a move that may spur capital inflows.“The measures on gold were positive for the rupee as the concern is about financing the deficit,” said Vikas Babu, a trader in Mumbai at state-run Andhra Bank. “We are still seeing demand for dollars ahead of the fiscal year end, so the rupee’s gains will be capped.”The rupee appreciated 0.4% to 50.1912 per dollar in Mumbai, the biggest gain since March 9.The currency is still 0.7% lower in the week after the Reserve Bank of India said yesterday that “upside risks” to inflation have increased because of an increase in global oil prices. Brent oil, the benchmark that India uses, has risen 14.5% to $122.91 a barrel this year.Gold accounted for 12.2% of India’s imports between April and September, compared with 9.9% a year earlier, according to Standard Chartered.The shortfall in India’s current account, the broadest measure of trade, will be 3.6% of gross domestic product in the 12 months ending March 31 and lower in the next fiscal year, Mukherjee said yesterday.One-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged at 9.75%, according to data compiled by Bloomberg.Three-month onshore forward contracts traded at 51.33 a dollar, compared with 51.48 on Thursday, and offshore non-deliverable contracts were at 51.36 from 51.53.