Markets likely to get negative start on Wednesday

Indian markets settled marginally lower on Tuesday amidst heightened volatility witnessed throughout the Budget Day, after the LTCG and STCG tax rejig announcement. Today, markets are likely to get negative start after the 2024 budget introduced significant shifts in capital gains tax that could affect investment decisions. The government hiked long-term capital gains tax (LTCG) to 12.5 per cent and short-term capital gains tax (STCG) to 20 per cent. Also, it hiked Securities Transaction Tax to 0.02 per cent for futures trading, and 0.1 per cent in case of options. Traders likely to keep close eye on corporate earnings. Axis Bank, Bajaj Finserv, Federal Bank, Jindal Steel, Larsen & Toubro and SBI Life are among the key companies scheduled to announce Q1 results on Wednesday. Foreign fund outflows likely to dampen sentiments in the markets. Foreign institutional investors (FIIs) net sold shares to the tune of Rs 2,975.31 crore in the cash market on July 23. Some cautiousness will come as an analyst at Moody's Ratings said India's fiscal deficit glide path set out for 2025-26 is reasonable, but a coalition government at the Centre may pose challenges to pass bigger reforms that the economy needs. However, traders may take some encouragement after analyzing budget documents. As per a private report, Finance Minister Nirmala Sitharaman’s Budget proposals lay out a comprehensive road map for transforming India into a developed nation, focusing on key priorities that aim to generate ample opportunities for all citizens in Viksit Bharat. It sets the stage for sustained economic growth, social development, and technological advancement. Some optimism may come as Commerce and Industry Minister Piyush Goyal said removal of angel tax for all classes of investors will help attract investments in the segment and further promote the growth of budding entrepreneurs. Also, IT Minister Ashwini Vaishnaw’s statement that the Union Budget announcement of the abolition of the angel tax is a significant milestone that will boost the startup ecosystem in India. He said it is a very good decision and has been the biggest demand of deep tech startups, and added that the move will spur investment in startups. Some support may come as Finance Secretary TV Somanathan expressed confident that India could see sub 7 per cent growth for the fiscal year 2024-25. Meanwhile, Kataria Industries and Macobs Technologies IPOs to debut on the bourses today.

The US markets ended lower on Tuesday as tech shares as investors assessed earnings of tech companies. Asian markets are trading mostly in red on Wednesday after Tesla and Alphabet reported disappointing financial results.

Back home, Indian equity benchmarks made a smart recovery from the day's lows and ended marginally lower as investors digested the announcements from the Union Budget 2024. After making slightly positive start, key gauges slipped into red as traders got cautious with the Global Trade Research Initiative (GTRI) stating that increasing foreign direct investment (FDI) from China in the domestic market may benefit in the short-term but it risks undermining India's long-term economic security and strategic autonomy. It said dependence on Chinese firms for key manufacturing capabilities could also expose India to supply chain vulnerabilities and geopolitical risks. After that, key gauges witnessed some buying but failed to hold gains and experienced a significant drop in afternoon deals on higher capital gains tax in the Union budget proposed by the Finance Minister, Nirmala Sitharaman. The government has announced raising of long-term capital gains tax (LTCG) on equity to 12.5 per cent from 10 per cent at present while raising short term capital gains tax to 20 per cent from 15 per cent earlier. It declared increasing the Securities Transaction Tax (STT) rate on Futures and Options (F&O) from 0.01 percent to 0.02 percent. It also increased the tax exemption limit for LTCG to Rs 1.25 lakh from Rs 1 lakh earlier. Besides, it has kept India’s FY25 capex outlay unchanged at Rs 11.11 lakh crore - the same as was earmarked in February. However, markets showed a robust recovery in the last hours of session despite more than 1 per cent fall during the budget speech, as the government's focus on lower fiscal deficit, increased spend on infrastructure and focus on rural spending helped calm the nerves of the traders. Traders also found some solace with Chief Economic Advisor (CEA) V Anantha Nageswaran’s statement that private sector investment has been improving after Covid-19 and it is expected to further pick up in the coming months. He also said there was a small slump during the Covid times, however, there is a possibility that they can invest more in machinery and equipment and also in intellectual property products.  Some support also came with a private report stating that private equity funds and venture capital funds investments have risen 8 per cent year-on-year to $31.5 billion in the first half of 2024. As per the report, the amount of funds invested is 30 per cent higher than the July-December 2023 period. Finally, the BSE Sensex fell 73.04 points or 0.09% to 80,429.04, and the CNX Nifty was down by 30.20 points or 0.12% points to 24,479.05.