Share markets and Gold sector not happy with Budget?

Last Updated: Fri, Jul 05, 2019 15:19 hrs
Nirmala Sitharaman

Mumbai: Markets certainly seem not too excited with the Budget announcement made on July 5 by Finance Minister Nirmala Sitharaman.

At 1:28 PM, a few minutes after the budget announcement, the Sensex crashed 466 points to a low of 39,441.38. At the start of the day, the Sensex had gained a few notches to cross to levels of 40,100.

At 2:45 PM, the trade was reportedly making-up for the losses by reporting a decline of 190 points at 39,713. With another forty minutes for the end of the session, the markets may be charmed by some of the announcements.

On the Bombay Stock Exchange, all indices were trading in the red. SmallCap Select Index was trading 0.83% in the red while LargeCap was down by 0.60%.

Among sector specifics, Information Technology stocks were trading in the red. This, in spite of the Rupee making a gain of 39 paise against the Dollar on Thursday. On the day of budget, the Rupee lost a margin of 10 paise against the Dollar. At the time of writing this story, the Dollar was trading at Rs 68.49.

Metal stocks were the worst affected posting a decline of 2.61 percent. Stocks such as JSW Steel, Hindustan Zinc, Tata Steel, National Aluminium, Hindalco, SAIL were reportedly trading in the red in a range of 1.5 - 5 percent.

Speaking of metals, the Finance Minister in her budget speech proposed raising customs duty on Gold and other precious metals from 10 percent to 12 percent.

Gold imports for the fiscal year 2018-19 were reported at $32.8 billion, down by 3 percent from the previous year. With international spot rates soaring to over $1400 levels, Gold imports are likely to hamper the Current Account Deficit. A higher tax is likely to increase retail rates of the yellow metal much to the disdain of investors and buyers. On the flip-side, a higher taxation increases cases of gold smuggling. The All India Gem and Jewellery Domestic Council in a pre-budget expectation had sought reduction in import duties on Gold to 4 percent.

On Thursday, Gold futures made a rally while jewellery businesses listed on the stock exchanged traded in the red. Domestic gold futures with Sitharaman's budget speech rallied by over 2 per cent. On the flip side, domestic jewellery businesses listed on the exchange such as Tribhovandas Bhimji Zaveri, PC Jeweller, Thangamayil Jewellery, made a fall.

Gold prices touched a six year low in international spot markets recently. On Friday, the rates hovered at $1,415 per ounce (rates for most of the year were range bound at $1350 levels). Global investors were likely to watch out for US employment data (expected to be announced later on Friday) for any positive cues. It is assumed that better jobs market may nudge the US Federal Reserve to increase interest rates. A rate hike could improve yields on investments made in US stock markets, Currencies, and Government Bonds.

Finance and Banking scrips were reported in the green. BSE Bankex was trading at 0.58 percent up. Yes Bank was among the losers with an 8 percent intra-day loss. In her maiden budget announcement, the Finance Minister has announced a slew of measures for NBFCs and Banking sector. Rs 70,000 crores as additional investment has been proposed for PSU banks while for NBFCs a government guarantee of 10% has been made by the Finance Minister.

"For the purchase of high rated pooled assets of financially-sound NBFCs amounting to one lakh crores in current financial year, the government will provide one-time six months partial credit guarantee to PSBs to first loss of upto 10 percent," said the Finance Minister.

Sitharaman summarized her speech by saying that the fiscal deficit was at 3.3 percent this year, brought down from 3.4 percent last year.

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