It was a frightening day for the Indian stock markets, with the Sensex ending the day lower by a mammoth 1,000 points. This was the worst fall for the markets since November 2016 and investors lost Rs 3.6 lakh crores. Even heavyweights were not spared, with stocks like HDFC and HDFC Bank, which normally hold fort, falling more than 2 per cent. ITC, with a 7 per cent fall led the losers after excise duty on cigarettes. Markets have not seen such a slide in many years now.
The stock markets tanked heavily, following the Union Budget. Here are 5 reasons the stock markets sold-off following the Union Budget.
1) LTCG stays
It was widely anticipated that the Long Term Capital Gains (LTCG) on shares would be abolished. That did not go through in the budget, which may have disappointed the mutual fund industry and investors. It would have been very good for investors, if LTCG was abolished.
2) Nothing major on infra
Many analysts were not convinced that this Union Budget was a growth oriented Budget, with lack of a focus on infra. Much could be done, for the real estate, construction and auto sector. That left investors largely disappointed, because here is where employment generation happens.
3) Investors would now pay tax on dividends
Rich and wealthy investors, would now have to pay a tax on dividends. For example, if you are already earning an income of Rs 15 lakhs plus, you would now have to add the dividend income to your income and pay tax. This means, for the highest tax bracket, the dividend is as high as 30 per cent. Earlier, dividends were tax free upto a sum of Rs 10 lakhs.
4) Weak global cues
The Dow Jones lost as much as 2 per cent on Friday, seeing the worst sell-off since August. According to reports, Apple has closed all its stores in Mainland China.
5) Bluechips fall
Some of the big bluechip stocks that have seen significant rally in the last few months, sold off heavily. Among these included names like HDFC Bank, Larsen and Toubro and HDFC.