Why is the Sensex falling? - Livemint

Market participants could not pin-point any big negative in the budget, but said the market would take time to digest the budget, and Saturday’s reaction was a knee-jerk one.

Mumbai: Benchmark equity indices erased early gains and slipped into the red on Saturday afternoon as finance minister Arun Jaitley’s first full-year budget fell short of investor expectations that had already risen sky high.

Market participants could not pin-point any big negative in the budget, but said the market would take time to digest the budget, and Saturday’s reaction was a knee-jerk one.

“The expectations were too high, and markets had rallied a lot ahead of the budget , this is more of a cool off,” said Vaibhav Sanghavi, managing director, Ambit Investment Advisors Pvt. Ltd.

At 1.31pm, BSE’s 30-share Sensex was down 0.84% at 28,973.84 points, while the National Stock Exchange’s 50-share Nifty slipped 0.88% to 8,766.65 points.

BSE Mid-Cap and BSE Small-Cap indices shed 1.22% and 1.30%, respectively.

In the broader market, losers outnumbered gainers more than two to one, indicating a weak market breadth.

Earlier in the day, Sensex had risen as much as 1.16% to 29,560.32 points, while the National Stock Exchange’s Nifty had climbed as much as 1.1% to 8941.1 points.

For the year-to-date, Sensex is still up 5.1% and the Nifty 5.8% higher.

Jaitley cut the corporate tax from 30% to 25% over five years and deferred the implementation of General Anti-Avoidance Rules (GAAR) by two years. He abolished the wealth tax, but said the so-called super rich, or people earning more than Rs.1 crore per annum, would pay a 2% extra tax.

“The market was expecting a T-20 game, and the government has delivered a budget for test match. Like railway budget, market will understand the finer points over a period of time. Budget is for investors and not for traders,” said Nilesh Shah, managing director of Kotak Mahindra Asset Management Co. Ltd.

For the year-to-date, Sensex is still up 5.1% and the National Stock Exchange’s Nifty is 5.8% higher.

“I would rate the budget a 7.5 on a scale of 10. Though it is a fairly well balance budget, the market expectations were really sky rocketing before this day,” said Nitin Jain, CEO, retail capital markets and global asset management at Edelweiss Financial Services Ltd.

“So I would not be surprised to see a market correction of maybe 5-6%,” Jain added.

According to Jain, the budget was not close to the ‘Visionary document’ that had been talked about in the run-up to its presentation.

“Overall, I would still say it is well balanced one. The levy on corporate taxation, rationalization of wealth tax, incentives by more expenditure towards infrastructure are all positives. But nowhere close to what markets were expecting,” Jain added.