Indian stocks were hammered as investors expressed disappointment after Pranab Mukherjee presented an expansionary budget that did not outline any major reforms. During today’s session the Sensex breached both the 15K and 14K levels. The Sensex nosedived 869 points to end at 14,043 after trading between 15,097 and 15,097.
The finance minister announced a rural spending thrust that would push the government’s fiscal deficit to a 6.8 per cent of gross domestic product, pushing the bond yield sharply higher.
Giving a push to its rural development projects, the government today announced a 144 per cent jump in the allocation for the flagship job guarantee scheme, NREGA, and 45 per cent hike for the Bharat Nirman programme that seeks to improve infrastructure in villages. Presenting the 2009-10 Budget, Finance Minister Pranab Mukherjee announced an allocation of Rs 39,100 crore for NREGA for 2009-10, an increase of 144 per cent over 2008-09.
“The budget proved to be a ‘low-on-deliverance’ affair and this was magnified on account of the huge expectations that the market had built from it. Amongst the many shortfalls in the budget, it was silent on the timeline for tackling the fiscal deficit position of the country,” said Dinesh Thakkar, CMD of Angel Broking.
Kalpana Morparia, head of JP Morgan’s Indian operations, said that markets over-reacted to the budget. Dina Mehta, MD of Asit C Mehta, said that she expects markets to rally once the budget sinks. “There are a lot of positives in the budget, including tax exemption and the new pension scheme,” she added.
Banks, realty, capital goods and metal stocks led the fall in the markets today. On the sectoral front, the BSE banking index plummeted 8.2 per cent on a rise in bond yields. IndusInd Bank, ICICI Bank and IDBI fell more than 9 per cent each. The BSE realty index fell 7.3 per cent and the BSE capital goods index shed 7 per cent. In the capital goods sector, Areva T&D India, Alstom Projects and Punj Lloyd fell more than 9.5 per cent today.
The metal index on the BSE lost 6.5 per cent and the BSE power index shed 6.4 per cent.
In the 30-share Sensex pack, 28 stocks ended lower. Reliance Infra was the top loser in the pack. The counter tanked 12.5 per cent to Rs 1,131. ICICI Bank, JP Associates, Tata Steel and HDFC dropped more than 9 per cent each.
World stock markets fell as oil prices slumped Monday amid concerns that any recovery in the global economy will be a long, hard slog following disappointing US jobs data last week.
In Asia, Japan's Nikkei 225 stock average fell 135.20, or 1.4 percent, to 9,680.87 and Hong Kong's Hang Seng dropped 226.23, or 1.2 percent, to 17,977.17 in a choppy session.