Indian Markets Decline Post-Budget amid Tax Hikes

The Nifty 50 and BSE Sensex both recorded significant declines, while broader market indices saw gains. Sectoral indices showed mixed performances amid varying investor sentiment. 

Indian markets closed on a decline Thursday, a day after the government proposed an increase in capital gains tax and a hike in the Securities Transaction Tax for F&O transactions in the Union Budget. The Nifty 50 index fell by 65 points to close at 24,413.50, while the BSE Sensex declined by 280 points to 80,148.88.

Despite the downturn in benchmark indices, broader market indices on the National Stock Exchange saw gains, except for the Nifty 50 and Nifty 100. This divergent performance underscores varying investor sentiment amid the budgetary and earnings landscape. Sectoral indices such as Nifty Bank, Nifty Financials, Nifty Auto, and Nifty FMCG recorded losses, while the Nifty Realty sector gained 0.78 percent after a 2 percent drop on budget day when the government removed the indexation benefit. Leading gainers in the Nifty 50 included HDFC Life Insurance, BPCL, Tech Mahindra, NTPC, and SBI Life Insurance. On the other hand, major losers were Bajaj Finserv, Britannia, Hero MotoCorp, Tata Consumer Products, and HUL. Large-cap stocks faced selling pressure, but mid-cap and small-cap segments were buoyed by optimistic market outlooks. The reduction in gold customs duty by the government aims to stimulate consumer spending and curb inflation, significantly affecting gold prices.

"The Budget has been somewhat disappointing from the capital markets' perspective due to the capital gains tax rate increase and the hike in the Securities Transaction Tax for F&O transactions," said Rupen Rajguru, Head of Equity Investments and Strategy at Julius Baer India.

 "The stock market will now shift its focus to Q1 FY25 earnings and global cues. The earnings season has been in line so far, with some positive signs visible in the IT and consumption sectors, although Financials are facing some strain." Market experts noted that despite continuous selling pressure since Wednesday, the medium-term market outlook remains positive.