Investors are having cold feet ahead of the Union Budget. Worries around an increase in taxation saw the benchmark indices correct for the fourth day in a row on Wednesday – the longest losing streak since September.
The Sensex fell 1.94 per cent, or 937 points, to end at 47,409.93, the lowest since December 28. The Nifty ended at 13,967.5, down 271 points, or 1.91 per cent, reporting the sharpest fall since December 21.
Foreign portfolio investors (FPIs) sold shares worth Rs 1,688 crore on Wednesday, registering their third straight day of selling. After climbing to an intra-day high of 50,184 last Thursday, the Sensex has declined 5.5 per cent. Most global markets, too, have corrected over the past week, but the decline in India has been sharper.
Experts said investors are apprehensive about whether Finance Minister Nirmala Sitharaman will be able to pull off a market-friendly Budget given the constraints on the revenue front. Investors are booking profits or waiting on the sidelines over concerns that the government may tweak capital market-related taxes to bridge the Budget deficit, they said.
The Centre has been grappling with a decline in tax collections and other revenue receipts due to lower dividends and divestment delay. "The upcoming Budget will be a tightrope walk for the government and negative surprises of higher taxation which may impact consumption cannot be ruled out. The market has become jittery ahead of this major event. Investors should build for a defensive portfolio and also hold cash, as there will be good buying opportunities in the future," Naveen Kulkarni, chief investment officer, Axis Securities.
The India VIX shot up 5 per cent to 24.4 on Wednesday. The fear gauge has surged nearly 25 per cent this month. Market players said traders have been expecting more wild swings in the market in the run-up to the Budget.
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