Sensex closes 839 points lower, Nifty down 256 pts to 10,760 on LTCG tax effect; 2,520 stocks end in the red

 BusinessToday.in        Last Updated: February 2, 2018  | 16:54 IST
Sensex closes 839 points lower, Nifty down 256 pts to 10,760 on LTCG tax effect; 2,520 stocks end in the red

As expected, the reintroduction of Long Term Capital Gains Tax (LTCG tax) in FM Arun Jaitley's Union Budget led to carnage on the Dalal Street.

Traders and investors unwinded long positions in equities ahead of the April 1, 2018 cut off date when LTCG tax of 10% on equities will be charged. The upward revision to the fiscal deficit target to 3.3 percent from 3 percent for 2018-2019 also dampened sentiment.

While the Sensex fell 839 points or (2.34%) to 35,066 level, Nifty fell 256 points to 10,760 level.

The Sensex fell 900 points intraday with midcaps witnessing a carnage, down 4.03%, the index's  biggest fall in 29 months.

The midcap index fell 696 points to 16,574 level.

Small caps also contributed to losses falling 869 points to 17,847 level.

Among sectoral indexes, auto stocks led the losses with the BSE Auto index falling 906 points to 25213 points.

Cummins India (8.47%), Bajaj Auto (4.90%) and Bharat Forge (4.57%) were the top losers on the index.

The Bajaj Auto stock fell even after the firm reported a 3.8 per cent increase in consolidated net profit at Rs 1,013.16 crore for the third quarter ended December 2017. The company had posted a consolidated net profit of Rs 976.82 crore in the year-ago quarter.

All 30 Sensex components except TCS (0.34%), HUL (0.10%) and Wipro (0.05%) closed in the red.

Bajaj Auto (4.90%), Bharti Airtel (4.62%), Axis Bank (4.28%) and Maruti Suzuki India (4.28%)  were the top losers.

Maruti Suzuki which touched the 10,000 mark on December 20, 2017, closed 402 points lower at 9000 points.

PC Jeweller was the top BSE loser falling 24.40%. The stock earlier fell up to 60%  to 195 level.

GMR Infra (15.38% ) and Bombay Dyeing (13.41%) were other major losers on BSE.

Anand James, Chief Market Strategist at Geojit Financial Services said, "More importantly, even with 10% tax it is still much more attractive than what you might end up with other asset classes like debt, real estate or gold. So if you have bought into the India story, certainly this tax incidence should not be a deterrent. That is likely to be the thought process of institutional buyers too, but it is fair to expect some churning before FY 2019 starts."

Market breadth was negative with 310 stocks closing higher against 2527 falling on BSE. 125 stocks were unchanged.

On the sectoral front, all 19 BSE indices closed in the red. BSE Auto index (906 points), bankex (878 points), capital goods (743 points), and consumer durables (744pts ) indices led the losses.

Chartered accountants' apex body ICAI said LTCG tax may make stock investments less attractive. "By removing exemption of long term capital gains on transfer of shares, this avenue may not be a preferable option any more. Further, the benefit of investment in bonds of NHAI/RECL etc. would be available only in respect of long-term capital gains on transfer of land or building and not any other capital asset. Also, the lock-in period has been increased from 3 to 5 years, " said ICAI.

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