New Delhi: In a dramatic turn of events, the domestic equities market experienced a substantial sell-off on Tuesday, following the unveiling of the Budget 2024-25. The disappointment in the stock market came as Finance Minister Nirmala Sitharaman announced increases in both short-term and long-term capital gains taxes, along with a hike in the securities transaction tax on futures and options (F&O).
Morning Optimism Turns to Midday Plunge
The Sensex initially opened on a positive note, buoyed by anticipation surrounding the Budget 2024-25. However, as the Budget Speech drew nearer, market sentiment shifted. During the speech, the Sensex plunged nearly 850 points before staging a partial recovery. By 1:26 PM, the Sensex was down by 654.79 points, settling at 79,847.29. Similarly, the Nifty index fell by 185.6 points, trading below the 24,350 mark at 24,325 points.
| Time | Sensex | Change | Nifty | Change |
|---|---|---|---|---|
| Open | ~80,500 | +50 | ~24,500 | +15 |
| 1:26 PM | 79,847.29 | -654.79 | 24,325 | -185.6 |
Key Announcements Leading to Market Reaction
Finance Minister Nirmala Sitharaman’s budget announcements included several measures that significantly impacted investor sentiment:
- Securities Transaction Tax (STT): Increased by 0.02% on F&O securities.
- Long-Term Capital Gains (LTCG) Tax: Raised from 10% to 12.5%.
- Short-Term Capital Gains (STCG) Tax: Increased to 20% for certain assets.
These tax hikes mean that selling listed securities, such as equity shares and units of equity-oriented mutual funds (with over 65% equity exposure) within a year, will incur a 20% STCG tax, up from the previous 15%.
Expert Insights
Some personal financial experts commented on the situation, stating, “The 2024 Budget has increased the short-term capital gains (STCG) tax to 20% and the long-term capital gains (LTCG) tax to 12.5%. This has caused some market instability as investors react to the higher taxes. While the goal is to raise more revenue, these changes might discourage short-term trading and make long-term investments more attractive, potentially changing how the market behaves in the coming months.”
However, she also noted a positive development: the government plans to raise the capital gains exemption limit on certain financial assets to Rs 1.25 lakh per year for the middle and upper-middle class.
Additional Budget Highlights
- New Industrial Parks: The government announced the development of 12 new industrial parks under the National Industrial Corridor Development program, aiming to boost industrial growth and create job opportunities.
