Sensex, Nifty plunge despite praise for Jaitley budget

Despite general appreciation of finance minister Arun Jaitley's budget by economists and experts, India's stock markets took a considerable plunge at the end of his presentation to parliament.

The Bombay Stock Exchange's benchmark Sensex went down 338 points, or 600 points from the early high.

Cigarette maker ITC, considered is the most influential stock in the Sensex, plunged over 9 per cent, taking markets lower with it. Other cigarette makers like Godfrey Phillips India and VST Industries also fell sharply, as Jaitley proposed an excise duty hike of 15 per cent and 25 per cent for different categories of cigarettes.

ITC was the top loser in both the Sensex and the NSE's Nifty indices. In the Sensex, ITC alone contributed nearly 30 points to the slide.

Another big reason for the drop is considered the absence of foreign investors from the market on a Saturday, as most countries apart from India enjoy a two-day weekend.

Jaitley's proposed postponement of the General Anti-Avoidance Rules or GAAR by two years is expected to encourage foreign investors, but that did not happen immediately – though analysts expect more foreing investment in the coming days.

Under the GAAR regime, authorities can deny tax benefit to any arrangement that is entered into primarily to avoid tax. The rule would have taxed foreign investors that route portfolio investments through tax havens such as Mauritius.