Finance secretary Hasmukh Adhia said the sell-off in India’s equity markets is due to weak global sentiment and not because of the long-term capital gains tax (LTCG) announced in the budget.
Addressing the post-budget session of PHD Chamber in New Delhi, Mr Adhia said global meltdown in stock exchange came at the very wrong time.
India’s benchmark Sensex index slumped 3.67% in intraday trading on Tuesday, before rebounding to erase more than half of the day’s losses, capping a volatile day of trading. The losses in India tracked a global rout in stocks from New York to Tokyo, even as fears of accelerating inflation sent bond yields surging.
At the end of trading in Mumbai, BSE’s 30-share Sensex dropped 561.22 points, or 1.61%, to 34,195.94 points, while the National Stock Exchange’s 50-share Nifty fell 1.58% to 10,498.25. The indices fell for a sixth straight session.
Earlier in the day, the Sensex plunged 1,274.35 points to 33,482.81, while Nifty declined 390.25 points to 10,276.30. Both indices plunged nearly 3.7% in intraday trading, their biggest decline since August 2015. The Sensex and the Nifty are down 5.75% and 5.68%, respectively, from their 29 January peaks of 36,283.25 and 11,130.40.
Around Rs9.87 trillion worth of investments have been wiped off over the last six trading sessions, the longest losing streak in four months, largely tracking the global sell-off.
“For now, risk is off the table. So, if people think they want to sell EMs (emerging markets) and if the turmoil continues, the carnage could worsen. I would think the global markets could stabilize though,” said Andrew Holland, chief executive of Avendus Capital Alternate Strategies.
“Global growth is fine. I am okay with India’s valuations too after the fall. The expectations from Indian market have come off after the rally,” Holland said.
The Sensex now trades at a one-year forward price-to-earnings ratio of 17.93 times, down from 19.1653 on 29 January. It is still higher than the five-year and 10-year historical averages of 15.6 times and 14.94 times, respectively.
All sectoral indices closed in the red on BSE on Tuesday, and market breadth was extremely weak as losers were 4.5 times the number of gainers on the exchange. Software exporters contributed the most to the losses for Sensex. Infosys Ltd and larger rival Tata Consultancy Services Ltd fell 2.62% and 3.58%, respectively.
