The stock markets
have logged their worst post-Budget one-month performance since 2001. The benchmark Nifty
has declined 7 per cent since July 5, when Finance Minister Nirmala Sitharaman presented her maiden Budget. The fall in the market has been triggered by a bunch of Budget proposals, such as the increase in tax surcharge on foreign portfolio investors (FPIs), the introduction of 20 per cent tax on share buybacks, and the move to increase free float in all listed companies by 10 per cent to 65 per cent.
Moreover, the government’s focus on fiscal prudence over stimulus package at a time when economic growth is slowing has led to further disappointment. What has hit the sentiment the most is the higher tax surcharge on overseas investors, who have pulled out nearly Rs 15,000 crore from domestic equities since the Budget. Though the surcharge was aimed at the super rich, FPIs
with non-corporate structures have been caught in the crosshairs. In 2001, the markets
had tumbled more post the Budget. However, it was largely on account of a scam involving Ketan Parekh. On most occasions, the market performance post-budget — including in 2000 (dotcom bust) and 2008 (Global Financial Crisis) – are largely linked to global events.