All sectoral indices led by realty, metal, capital goods, healthcare and bankex were trading in the negative terrain, falling by up to 3.47%.
New Delhi: Indian stocks fell further on Monday, extending their Friday’s losses, as market concerns deepened over long-term capital gains tax (LTCG) and fiscal slippage. The BSE Sensex fell 0.88% to 34,757.16, while the broader NSE Nifty lost 0.87% to settle at 10,666.55.
The market continued its downward trend despite the finance ministry trying to calm the nerves. Subhash Chandra Garg, secretary, department of economic affairs (DEA), had said on Monday that the Centre might reduce its fiscal deficit to 3% by 2019-20, a year ahead of the goal announced in the Union budget presented last week.
“Fiscal Deficit at 3.3% for 2018-19, backed with statutory commitment to bring it down to 3% by 20-21 (might actually be achieved in 19-20) …” Garg said in a tweet.
Finance minister Arun Jaitley, in the Union budget 2018-19, has proposed to levy 10% LTCG on equity gains of over Rs 1 lakh. Jaitley also revised upwards fiscal deficit targets for 2017-18 and 2018-19 from 3.2% and 3% to 3.5% and 3.3% respectively.
LTCG was withdrawn in 2004. In its place, 15% securities transaction tax (STT) was brought in. Jaitley has retained the STT while bringing back the LTCG.
Imposition of LTCG and fiscal slippage have spooked investors, triggering heavy sell-offs.
On Friday, a day after the budget was presented in parliament, the Sensex and Nifty 50 lost over 2%, the biggest single-day loss since November 2016.
The weakness in global equities markets has also weighed on Indian stocks.
According to a Bloomberg report, global stocks extended the biggest selloff since 2016, with European and Asian equities slumping and futures pointing to another leg down for U.S. share at the open. Treasuries and the dollar stabilised while oil fell and gold rose. Japan bore the brunt of the declines, with Nikkei 225 Stock Average erasing this year’s gain, while a measure of its volatility surged to the highest since November. U.S. equity futures sank as much as 1.1% in Asia on Monday but by 7:35 a.m. in London March e-mini contracts on the S&P 500 Index had pared losses to 0.1%.
The MSCI Asia Pacific Index slid 1.4%, retreating from a rally that has sent equities to overbought levels for most of January.
Bearish sentiment wiped out the year-to-date gain of Japan’s Nikkei 225 Stock Average. The gauge retreated below a 76.4%-retracement point from a high in January 2018 to a low in April 2017. Its next key Fibonacci-retracement level stands at 21,873.76. The Nikkei closed 2.6% lower to 22,682.08, while the Topix declined 2.2 percent to 1,823.74.
This is the third time Jaitley has relaxed fiscal deficit target.
In 2015, while outlining NDA government’s fiscal consolidation strategy, Jaitley had promised to get back to the 3% fiscal deficit by 2017-18. As recently as November, Jaitley assured foreign investors in the US that the NDA government will stick to the committed fiscal deficit target. But he has again failed to keep his word.