Investors bite their nails

Benchmark Sensex plummeted 840 points on Friday -- its biggest single-day fall in twoand-a-half years -- while the NSE Nifty ended below the 10,800-mark as the post-Budget sell-off continued for the second straight day.

The sentiment was attributed to negative global cues and the announcement in the Budget on the reintroduction of the long-term capital gains tax, which has disappointed investors. Investors will also have to pay 10 per cent tax on distributed income from equity-oriented mutual funds. Stocks of banking, capital goods, auto, consumer durables, oil and gas, and metals witnessed a huge sell-off.

Market mood suffered another setback after Fitch Ratings said on Friday that high debt burden of the government constrains rating upgrade.

"From a sovereign credit perspective, a notable feature of the Budget is that fiscal consolidation has been postponed," said Thomas Rookmaaker, director and primary sovereign analyst for India, Fitch Ratings.

"In Parliamentary language, Sensex just placed a solid 800 point no confidence motion against Modi's budget – RAHUL GANDHI

The BJP government has a fiscal deficit target of 3.3% of GDP for the next fiscal, deviating from its glide path for the third time in four years. The Budget has also revised fiscal deficit target for 2017-18 to 3.5% of the GDP from the original estimate of 3.2%.

Sources said some traders and investors (including foreign institutional investors) seem to be unclear about the tax impact on sale of equity shares between February 1 and March 31, 2018, and are pre-empting the confusion by putting sale orders today itself.

The next trigger for markets is the RBI's policy review due next week. The central bank is due to hold its next policy review on February 6-7 amid worries it could turn more hawkish on inflation after inflation hit a 17-month high in December, well above its 4 per cent target.