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Markets not much enthused

MUMBAI: The stock markets were not much enthused by the Union Budget and the benchmark Bombay Stock Exchange 30-share sensitive index (Sensex) closed with a loss of 245.76 points or 1.38 per cent at 17578.72.

However, market participants believe that the huge investments in certain sectors would impact stock prices in the days to come, as purchasing power of the people was expected to go up with a People’s Budget.

“The markets did not expect much, but the fact that corporate taxes and securities transaction tax (STT) were not raised, and long-term capital gains tax was not tinkered with is a positive for investors. We do not expect any more reforms till the formation of the next government and in a high-inflation, slower growth economy, in a global recessionary environment, the best investment strategy would be a bottom-up, value-driven, domestic consumption focussed sector selection one,” said Ajay Bagga, CEO, Lotus India Asset Management Company.

The sensex was down by around 110 points when the Union Finance Minister, P. Chidambaram, started his Budget speech. Later, when he finished his announcements, the market lost more than 450 points.

However, it recovered in the later part of the trading and closed with a loss of 245.76 points.

Among the broad-based indices, the midcap index lost 31.37 points to close at 7680.39 and the smallcap index lost 40 points at 9628.13. The BSE 500 lost 69.30 points at 7108.12. Automobile sector index gained 1.19 per cent, FMCG 0.91 per cent and the Bankex 0.40 per cent. Most other sectoral indices closed in the negative territory.

Sectors which are likely to benefit are automobile, fast moving consumer goods, healthcare, textile machinery and those engaged in urban infrastructure.

Capital market intermediaries and cement companies might see some short-term negative impact, said Sanjay Sinha, Chief Investment Officer, SBI Mutual Fund.

The fund industry will benefit with longer term investors being encouraged and short-term churning being discouraged by the short-term capital gains tax being raised to 15 per cent.

Also the imposition of service tax on ULIPs will level the playing field with mutual funds, which have been paying this for a number of years already, said Mr. Bagga.

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