- Indian stock markets fell about 1% as the government proposed new tax increases.
- Consumer and agriculture stocks gained amid new government financial allocations.
- The Indian rupee hit a record low against the US dollar at 83.69.
The Indian stock markets saw a significant decline on Tuesday following the government’s proposal to raise taxes on capital gains and trading derivatives. The NSE Nifty 50 and S&P BSE Sensex both dropped around 1%, with the indices trading at 24,225 and 80,024 respectively. Additionally, the Indian rupee fell to a record low against the US dollar, reaching 83.69.
This downward trend was driven by concerns over the increased Securities Transaction Tax (STT) on futures and options, which was a key announcement in the Union Budget 2024-25.
Consumer Stocks Rally Amid Market Decline Following Tax Hike Announcements
Despite the overall market downturn, consumer stocks bucked the trend and gained around 2%. This positive movement came after the government announced a substantial allocation of 1.52 trillion rupees for the agriculture and allied sectors. Consequently, agriculture-related stocks such as Kaveri Seeds, Mangalam Seed, and Dhanuka Agritech saw notable gains, rising between 4.4% and 10.5%.
Despite the overall negative sentiment, consumer stocks emerged as a bright spot, posting gains of around 2%. The government’s decision to allocate 1.52 trillion rupees for the agriculture and allied sectors provided a significant boost to these stocks. Agricultural companies like Kaveri Seeds, Mangalam Seed, and Dhanuka Agritech saw their shares rise significantly, with increases ranging from 4.4% to 10.5%.
Capital goods stocks, on the other hand, were among the hardest hit following the budget announcements. With no increase in planned infrastructure spending, companies like Larsen & Toubro (L&T), ABB India, Thermax, and Siemens saw their stock prices fall between 1.5% and 5%. L&T was notably the top loser on the Nifty 50 index.
Investors’ reactions were primarily driven by the increased STT on futures and options, which raised concerns about the impact on trading volumes and market liquidity. The previous rates for STT on futures and options were 0.0125% and 0.0625%, respectively, but these have now been increased to 0.02% and 0.1%.
The recent government proposals to increase taxes on capital gains and derivatives trading have caused a significant downturn in the Indian stock markets. While consumer and agriculture stocks have shown resilience, other sectors, especially capital goods, have been adversely affected.
“The Indian stock markets experienced a significant decline on Tuesday following the government’s proposal to raise taxes on capital gains and trading derivatives.”
