The market started off on a fairly bright note this morning, with investors tracking strong global cues and indulging in some brisk buying at several counters from across various sectors.
And then, movements became a bit listless - the market remained in positive territory though - as the finance minister commenced his budget speech. During the early part of the presentation of the budget, the market held on to its gains amid stock and sector specific activity, but caved in once the minister started reeling out tax proposals.
While the proposals to hike allocation for healthcare, infrastructure, education, rural development and water & sanitation, and additional interest deduction on housing loan received the thumbs up from investors, the hike in corporate tax surcharge, super rich tax, customs duty on imported cars and higher excise duty on SUVs dampened sentiment and triggered a sell-off in afternoon trades.
PSU bank stocks took a beating with investors reacting to the proposal to continue interest rate subsidy on short term crop loans.
Though the finance minister stressed the need to cut down current account and fiscal deficits, a lack of clarification as to how the government plans to tackle this crisis appeared to have prompted investors to switch to selling mode today.
During his budget speech, the finance minister P Chidambaram stated 'the country's economy is recovering, and that retaining high growth is a top priority'. The FM sought support to navigate the economy, which has slowed down since 2010 and said that controlling inflation and fiscal deficit is the main aim. He stressed the need to cut spending to control inflation.
The FM proposed a 30% rise in FY 14 expenditure, which is now pegged at Rs 16.44 lakh crore. Allocating Rs 21,000 crore for national health mission, an increase of 24%, the finance minister set aside Rs 37,000 crore for healthcare.
For education, an allocation of Rs 65,000 crore has been made in the budget. Allocation for education was hiked by 17%, and this triggered some buying in Educomp Solutions, Core Education, NIIT, Aptech and Everonn.
Realty stocks saw some buying after the finance minister proposed additional interest deduction on housing loan, but retreated later.
Stating that fiscal consolidation cannot be restored only by cutting expenditure, the finance minister imposed an additional surcharge on individuals earning over Rs 1 crore. The individual income tax slabs have been left unchanged.
The BSE benchmark Sensex, which surged to 19,322.28 in early trades, plunged to 18,793.97 and eventually ended the session with a loss of 290.87 points or 1.52% at 18,861.54. The Nifty index of the National Stock Exchange closed at 5693.05, recording a loss of 103.85 points or 1.79%.
Power, bank, capital goods and metal stocks tumbled. Realty stocks saw some buying during the presentation of the budget, but caved in to pressure later on. PSU and oil stocks too mostly ended notably lower. Automobile stocks ended on a mixed note.
FMCG and healthcare stocks too closed on a mixed note. Select information technology stocks moved higher. Consumer durables stocks too found some support.
Tata Consultancy Services ended 2.2% up. Bharti Airtel, Tata Motors, Bajaj Auto and Sun Pharmaceutical Industries closed with modest gains. HCL Technologies, Kotak Bank and Infosys also found some support.
State Bank of India ended 5.8% down. ICICI Bank and HDFC Bank lost 3.8% and 2.6%, respectively.
Tata Steel lost around 4%. Hindalco, Jindal Steel & Power and Sterlite Industries declined by 2.6% - 3%. Coal India ended with a modest loss.
Maruti Suzuki ended 3.7% down and Mahindra & Mahindra lost around 2.2%, while Hero Motocorp closed marginally lower.
Larsen & Toubro and BHEL, the capital goods sector heavyweights, ended lower by 3.1% and 2.5%, respectively.
Tata Power lost 2.8%. HDFC, Hindustan Unilever, NTPC and Reliance Industries closed lower by 2% - 2.4%.
Reliance Infrastructure, down 9.4%, was the biggest loser in the Nifty index. Ranbaxy Laboratories, Bank of Baroda, Axis Bank, ACC, IDFC, Power Grid Corporation, Siemens, Jaiprakash Associates, Sesa Goa, Grasim Industries and ACC lost 2% - 5%. Lupin, Ultratech Cement, Cairn India and BPCL also ended notably lower.
With several midcap and smallcap stocks sliding down to lower levels, the market breadth was very weak at close. Out of 2931 stocks traded on BSE, as many as 1973 stocks declined. 857 stocks moved up and 101 stocks ended flat.