At the time of this writing, Nifty is down by more than 1% in today’s trade. There are reasons why this decline could continue to happen throughout today.
Let’s start with global factors first. Over the last few days, the global markets had built the expectation that the US Federal Reserve will cut interest rates due to the ailing economy. However, these hopes are now diminished as the June payroll numbers for the US came out better than expected on Friday, suggesting that the US economy has still some fire left in it. Already the somewhat positive outcome of the G20 meeting last week had rekindled hopes of resolving the US-China trade war. This news had already dampened the expectations of a significant rate cut from the Fed. These global factors will also influence the Nifty this week.
Let’s talk about some of the factors on the domestic front. India’s finance minister Nirmala Sitharaman announced its union budget on Friday. The markets didn’t like the budget, mainly due to the following factors:
- Proposal to raise the public float of listed companies from 25% to 35%: It will hit the promoter-driven companies such as Larsen & Toubro (NS:LART) Infotech Ltd (NS:LRTI), Tata Consultancy (NS:TCS) Services, Wipro (NS:WIPR), etc., and will involve offloading the excess shares in the market.
- Introduction of 20% tax rate on the buyback of shares: This will impact large IT companies such as Infosys (NS:INFY), TCS, Tech Mahindra (NS:TEML), etc. because they were the biggest adopter of share buybacks till now.
- Increase in surcharge on high-income groups: It will have an indirect impact on the prevailing tax rate on LTCG (long-term capital gains), again impacting the investors.