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Informist, Tuesday, Jul 23, 2024

By Anjana Therese Antony

MUMBAI – The announcement of a hike in capital gains taxes in the Union Budget was a bolt from the blue, which shook the Indian equity market today, which was in fact expecting a relaxation in these charges. However, various schemes for the rural economy's growth turned the focus to sectors heavily dependent on rural demand, such as fast-moving consumer goods, which helped the market limit losses. 

"Hike in short-term capital gains and long-term capital gains have been sentimentally negative for the equity markets ... However, this can be the beginning of reforming the capital markets and curbing retail participation in the F&O (futures and options) segment," Deepak Ramaraju, senior fund manager at Shriram Asset Management Co, said in a post-budget note.

During the Budget, Finance Minister Nirmala Sitharam announced an upward revision of long-term capital gains tax to 12.5% from 10% earlier, and an increase in short-term capital gains tax to 20% from 15% earlier. The government also slightly raised the securities' transaction tax on futures and options to 0.02% and 0.1%, respectively. "We can expect more measures in the F&O space in the days to come," Ramaraju said. 

The tax hike-led shock pulled the Nifty 50 about 1.3% lower during the day, but the index recovered most of the losses and closed at 24479.05 points, down 0.1%. The immediate support for the 50-stock index is pegged at 24300 points and resistance at 24600-24700 points.

As the overall market felt the heat, FMCG stocks bucked the trend and were the top gainers today. The government announced 2.66 trln rupees for rural development and infrastructure, along with a provision of 1.52 trln rupees for agriculture and allied sectors. In the FMCG pack, ITC and Tata Consumer Products gained the most and closed up 5.5% and 4.3%, respectively. 

The Nifty FMCG index was the top sectoral gainer and closed 2.7% higher, with most constituents in the green. These stocks saw weakness at least in the last one year on poor financial performance, due to a fall in volume caused by a weak monsoon. However, the sentiment turned positive on hopes of an above-normal monsoon this year. Analysts said the worst is behind for FMCG companies, and they may perform better in the coming quarters, with some greenshoots in demand recovery seen. 

The proposed measures to boost to the rural economy also aided automobile stocks today. TVS Motor Co gained the most among auto stocks and closed nearly 2% higher, while Hero MotoCorp closed 1% higher after rising over 3% during the day.

"The enhanced minimum support prices for major crops and the launch of phase IV of PMGSY (Pradhan Mantri Gram Sadak Yojana) are positive steps that will boost rural incomes and improve rural connectivity, thereby potentially increasing rural auto sales," Manish Raj Singhania, president of Federation of Automobile Dealers Associations, said in a note. 

Jewellery stocks, too, rose after the finance minister announced a reduction in customs duty on gold and silver to 6% from 15% earlier. Kalyan Jewellers India and Titan Co rose and closed 4.4% and 6.5% higher, respectively. "The reduction in import duties on gold and silver to 6% and platinum to 6.4% is a major boost for our industry, enhancing affordability for consumers and competitiveness for the manufacturing sector by releasing working capital," Vipul Shah, chairman of the Gem and Jewellery Export Promotion Council, said in a post-Budget note.

Among other gainers today were NTPC and Bharat Heavy Electricals, which recovered losses and rose 3% each during the day after the government announced fiscal support for a joint venture of these two companies. Sitharaman said the joint venture will set up a full-scale 800 MW commercial thermal power plant using ultra super critical technology.

Also, the government said the National Bank For Agriculture and Rural Development would facilitate the financing and processing of shrimp production, boosting shrimp exporting company Avanti Feeds, which closed nearly 5% higher after gaining 9%. 

The government did not make any announcements pertaining to fertiliser subsidy, due to which investors pulled money out of the sector. Investors were also hoping the government brings in measures to ease the sector's dependency on fertiliser imports, which also did not materialise. Rashtriya Chemicals & Fertilizers and Fertilizers & Chemicals Travancore were among the worst-hit constituents of Nifty 500 index. 

The government also did not make any announcements for railways, even as investors had expected the Centre to make higher capital allocation to boost the sector. IRCON International and RailTel Corp of India closed over 8% and 6% lower, respectively.

On the earnings front, Suzlon Energy hit an over 14-year high of 57.83 rupees on the National Stock Exchange after the company's consolidated net profit for the June quarter grew threefold on year. The company had reported its earnings after market hours on Monday. 

* Of the Nifty 50 stocks, 23 rose and 27 fell

* Of the Sensex stocks, 14 rose and 16 fell

* On the NSE, 1,177 stocks rose, 1,515 fell, and 87 were unchanged

* On the BSE, 1,743 stocks rose, 2,160 fell, and 112 were unchanged

* Nifty Realty: down 2.3%; Nifty PSU Bank: down 1.4%; Nifty FMCG: up 2.7%

BSE                                               NSE
Sensex: 80429.04, down 73.04 pts or 0.1%          Nifty 50: 24479.05, down 30.20 pts or 0.1%

End

With inputs from Alina Geogy

Edited by Aditya Sakorkar

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