Budget and stock market: Nifty 50 sees biggest intraday fall on Budget day since 2020

Budget 2024: On Tuesday, July 23, the Nifty 50 experienced its largest intraday drop on a Budget Day since 2020 after Finance Minister Nirmala Sitharaman announced hikes in the Security Transactions Tax (STT), long-term capital gains tax (LTCG), and short-term capital gains tax (STCG).

Sensex fell 1,278 points, or 1.6 per cent, to 79,224.32, while the Nifty 50 plunged 435 points, or 1.8 per cent, to the level of 24,074.20 during the session on Tuesday.

The key indices, however, pared losses as the day progressed. Around 2:15 pm, the Nifty 50 was 0.23 per cent down at 24,453.15.

The Indian stock market saw a significant decline of about 2.5 per cent on Budget Day in 2020 as there were no major announcements for the markets.

On the next Budget Day in 2021, the stock market jumped 4.7 per cent. The market clocked a significant gain of 1.4 per cent on Budget Day in 2022. However, on the next year’s Budget Day it declined 0.3 per cent.

On Tuesday, Sitharaman proposed to increase the rates of STT on the sale of an option in securities from 0.0625 per cent to 0.1 per cent of the option premium, and on sale of a futures in securities from 0.0125 per cent to 0.02 per cent of the price at which such futures are traded.

Moreover, the FM announced that LTCG on all financial and non-financial assets will attract a tax rate of 12.5 per cent from 10 per cent earlier and that STCG tax on certain financial assets will attract a tax rate of 20 per cent from 15 per cent earlier.

Experts believe the announcements will have a short-term impact on the market and investors should use market corrections to add quality stocks to their portfolios.

“The hike in capital gains tax rates has understandably caused market jitters, especially because the tax revenue momentum was reasonably good. This unexpected policy shift is likely to weigh on investor sentiment in the short term, leading to higher market volatility than seen in the recent past. Investors should stay focused on the fundamental strengths of their portfolios. Such short-term market fluctuations may offer opportunities to add strong names to their portfolio,” said Alok Agarwal, Head – Quant & Fund Manager, Alchemy Capital Management.

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First Published:

23 Jul 2024, 02:41 PM IST