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Biggest 10-year Decline in Stock Market from Budget, Loss of 3.46 Lakh Crores in One Day

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Finance Minister Nirmala Sitharaman’s second budget has not met the expectations of the stock market. The stock market has disappointed as soon as the budget arrives. The situation became such that the stock market saw the biggest decline in 10 years, which caused millions of crores of investors.

On February 1, Finance Minister Nirmala Sitharaman presented the general budget. In this budget, many special announcements were made for the middle class among the farmers, women, youth, students.

At the same time, the corporate sector has also been given relief. However, the immediate reaction of the stock market did not go well with this budget of Nirmala Sitharaman. As a result of this, 3.46 lakh crore rupees of investors were drowned in one day.

 

How did 3.46 lakh crores sink?

In fact, the market cap of the total companies listed on the Sensex Index BSE was Rs 1,56,50,981.73 crore on January 31, a day before the budget. At the same time, on the budget day i.e. February 1, the market cap came down to Rs 1,53,04,724.97 crore. In this sense, the investors have lost more than 3.46 lakh crore in just one business day.

 

The biggest decline in 10-Years

Let us know that on Saturday, the Sensex saw the biggest decline of 10 years on the budget day. At the end of trading, the Sensex closed at 39,735.53 points, a loss of 987.96 points or 2.43 percent.

Similarly, the Nifty fell 300.25 points or 2.51 percent to 11,661.85 points. Let us know that the stock market is not traded on Saturday on a weekly holiday, but this time the market was open due to the general budget.

 

What is the reason for the decline in the market?

  • The biggest reason for the decline in the stock market is the removal of the Dividend Distribution Tax / Dividend Distribution Tax (DDT) in the budget. Actually, the government has removed DDT to give relief to companies. DDT is a tax that is levied on dividends issued by a company to shareholders.

Now, these taxes will not be levied on companies, but no relief has been given to the shareholders on DDT in the budget. This is the reason why there is an atmosphere of disappointment among the shareholders.

 

  • With the removal of DDT, the government’s revenue is going to be reduced to Rs 25,000 crore. The government has taken this decision at a time when the fiscal deficit is steadily increasing. In fact, the government has raised the fiscal deficit target to 3.8 percent of gross domestic product (GDP) for the current fiscal year.

Earlier the target of fiscal deficit was kept at 3.3 percent. It is obvious that the government has not been able to achieve its own goal. Increasing fiscal deficit will have the same effect as spending on your earnings. In the event of increasing expenses, the government has to take loans.

 

  • The government will raise a loan of Rs 5.36 lakh crore from the market in the next financial year. At the same time, a target of Rs 4.99 lakh crore debt has been set till March of the current financial year 2019-20. Earlier, the government had set a target of Rs 4.48 lakh crore to raise debt. In such a situation, it is clear that the government will have to take more debt from the market now than before.

 

  • The budget has set a target of raising Rs 2.10 lakh crore from disinvestment in the next financial year. This is almost three times the revised target of Rs 65,000 crore estimated for the current financial year. In such a situation, there is a possibility that the government may sell its stake in several companies, including LIC, to achieve this goal in the next financial year. Please tell here that in the budget presented on July 5, 2019, the target of raising 1.05 lakh crore from disinvestment in the current financial year, but now it has been revised to Rs 65,000 crore.

 

  • Apart from this, the market was expecting relief in long-term capital gains tax, which has suffered a setback. At the same time, the auto, real estate sector also has not got any surprise in the budget. This is the reason why there is an atmosphere of disappointment among investors.
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