Indian equities experienced a significant decline following Union Finance Minister Nirmala Sitharaman’s announcement of increased capital gains taxes in the Union Budget 2024.
The Long Term Capital Gains (LTCG) tax has been raised from 10 percent to 12.5 percent while the Short Term Capital Gains (STCG) tax on certain assets will increase from 15 percent to 20 percent. Additionally, the securities transaction tax (STT) on futures and options has been raised to 0.02 percent and 0.1 percent, respectively.
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The market reacted sharply to these changes, with the 30-share Sensex dropping over 500 points, briefly dipping below the 80,000-mark. The Nifty index also traded in the red. By the end of the trading session, the Sensex closed at 80,502.08, and the NSE benchmark finished at 23,537.85.
Amidst the negative market sentiment, there was a positive note in the Budget: an increase in the standard deduction in the new tax regime from Rs 50,000 to Rs 75,000.
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Market Impact and Sector Performances
While some sectors struggled, a few stocks saw gains. Titan, ITC, and Hindustan Unilever emerged as leading gainers among the BSE pack. However, major losers included Power Grid, Bajaj Finance, and Larsen and Toubro. IT stocks such as HCLTech, Infosys, and Tech Mahindra also experienced declines.
The pre-budget Economic Survey, released yesterday, highlighted a slowdown in IT sector hiring in the last financial year, with minimal prospects for significant improvement in the near term.
