Budget 2024 Stock Update: Stock Markets Plunge as Capital Gains Tax Hiked, Nifty, Sensex Fall Nearly 2% Each as FM Unveils Budget 2024

The stock markets saw a great fall today on July 23rd following the unveiling of Union Budget 2024 by Finance Minister Nirmala Sitharaman which proposed increased taxes on capital gains and derivatives trading. While investor expectations were for unchanged tax rates, these benchmark indices Sensex and Nifty 50 each lost nearly 2%. 
As of press time the Nifty 50 is trading at 24,337.65 down 0.70% or 171.60 points. Sensex stands at 79,930.60 falling 0.71% or 571.48 points.

The Finance Minister announced a doubling of the Securities Transaction Tax (STT) on futures and options (F&O) trading. The STT rate for equity and index traders will now be 0.02% and 0.1% respectively up from the previous rates. This move appears aimed at curbing excessive speculation in the derivatives market.

Additionally Sitharaman proposed raising the long-term capital gains (LTCG) tax rate on all financial and non-financial assets to 12.5% from the earlier 10%. Short-term capital gains on certain financial assets will now attract a higher tax rate of 20% up from the previous 15%.

These tax increases were unexpected by investors causing them to unload stocks. The rupee also plummeted to the lowest ever level against the dollar at 83.69, compared with a previous record low of 83.6775.

Several sectors however recorded gains which were announced during budget. After the finance minister promised Rs 1.52 lakh crore in farm support, agriculture shares jumped up to 10%. Moreover, basic customs duty on gold and silver as well as key minerals such as copper, lithium and cobalt could be reduced according to government proposal.

Looking at individual stocks, ONGC led the top 5 losers chart with a 3.80% decline followed by Larsen & Toubro (-3.51%), Shriram Finance (-3.25%), Hindalco (-3.17%) and Bajaj Finance (-3.04%). On the other side Titan topped the gainers list with a 6.07% increase followed by ITC (4.52%), Tata Consumer Products (3.37%), Hindustan Unilever (1.91%) and Britannia (1.74%)

In her budget speech Sitharaman outlined several key economic measures. The fiscal deficit for FY25 is pegged at 4.9% of GDP with an aim to bring it below 4.5% by next year as Expenditure for FY25 seen at Rs 48.21 lakh crore. Receipts for FY25 also seen at Rs 32.07 lakh crore. The government plans to allocate Rs 2 trillion for job creation in the next five years and Rs 1.52 trillion for agriculture and allied sectors.

Some of the notable announcements include supportive measures towards establishment of 12 industrial parks, credit support to SMEs as well as launching three employment-related incentive schemes

Investors are anticipated to continue experiencing a volatile market as they process the budget proposals. It is expected that analysts will carefully scrutinize these tax changes with regard to their effect on trading volumes and general market sentiment in the following days.