Indian shares keep falling after tax hike on equity investments

FILE PHOTO: People walk past the Bombay Stock Exchange building in Mumbai·Reuters
Manvi Pant and Bharath Rajeswaran
Updated 2-min read
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By Manvi Pant and Bharath Rajeswaran

BENGALURU (Reuters) -Indian benchmarks fell on Wednesday, dragged by financials, with sentiment still sour a day after the government raised the tax on gains from equity investments.

The NSE Nifty 50 fell 0.27% to 24,413.5, while the S&P BSE Sensex settled 0.35% lower at 80,148.88.

The tax hike on long-term capital gains "certainly increases the hurdle for investors in financial assets and hence it is a sentimental negative," said Harish Krishnan, co-chief investment officer and head of equity at Aditya Birla Sun Life Asset Management Company.

The blue-chips had slipped 1.6% in the previous session after the government hiked the tax rate on equity derivatives trades and on profit from equity investments. However, a jump in consumer stocks helped the indexes recover to end with relatively lower losses.

"The tax hikes have overshadowed the positives from the budget," Krishnan added.

Six of the 13 major sectors logged losses, on the day.

Banks, financial services, private banks dropped 0.6%-1%.

Top private lenders HDFC Bank, ICICI Bank and state-owned lender State Bank of India lost between 0.3% and 1.5%.

The drop in financials could be due to likely selling by foreign investors, who have higher ownership in the sector than other segments, according to two analysts.

Non-bank lender Bajaj Finance fell about 2% after missing June quarter profit estimates on higher provisions and rising credit costs.

Private life insurer ICICI Prudential Life jumped 8.75% after posting profit growth in June quarter. Other life insurers like HDFC Life and SBI Life Insurance gained 4.5% and 2.4%, respectively, on improving earnings outlook in the sector.

The broader, more domestically focussed small- and mid-caps recovered from a muted start to close 1.75% and 1% higher, respectively.

The adverse impact from budget is likely to be only temporary as fiscal prudence and rural focus could spur a return to normalcy in Indian markets, said Pranav Haridasan, managing director and chief executive at Axis Securities.

(Reporting by Manvi Pant and Bharath Rajeswaran in Bengaluru; Editing by Eileen Soreng, Savio D'Souza and Nivedita Bhattacharjee)