Budget 2024: Stock markets react negatively to tax provisions on investors

Stock markets react negatively to Budget, with increased tax burden on investors, leading to high volatility and losses in banking stocks.

The stock markets reacted negatively to the Budgetary provisions concerning additional tax burden on investors and closed in the negative territory led by losses in banking stocks after undergoing high volatility. The key benchmark indices recovered most of the lost ground in the second half of trading.

The market reacted because the increase in capital gain tax has been viewed as a negative for the investors and the 5% increase in Short Term Capital Gain (STCG) tax is likely to adversely impact short-term investors in the near term. 

The BSE Sensex having witnessed intraday swing of over 1,500 points closed with a loss of 73.04 points or 0.09%. The Sensex touched intraday high of 80,766 points and a low of 79,244 which was towards the end of Finance Minister’s speech. 

The NSE Nifty 50 index, too, witnessed excess volatility and closed with a loss of 30.20 points, or 0.12%, at 24,479.05. The intraday movement was in the range of more than 500 points.

The top losers in the Sensex included L&T down 3.10%, Bajaj Finance (2.18%), SBI (1.65%), Axis Bank (1.62%) and HDFC Bank (1.39%). 

After initial gains, the indices witnessed heavy profit booking due to volatility surrounding the Union Budget. However, the market managed to digest the negative factors and concluded the day in a marginal negative note, said Hrishikesh Yadve, AVP Technical & Derivative Research at Asit C Mehta Investment Intermediates Ltd. 

According to V. K. Vijayakumar, Chief Investment Strategy, Geojit Financial Services, the Budget proposals with the intent of raising tax revenue from capital gains, were slightly negative.