It was a volatile trading day on the stock markets on Wednesday. Stocks surged in reaction to Finance Minister Nirmala Sitharaman’s union budget. However, a sell-off in shares of Adani Group as well as life insurance companies dragged markets lower in the second half.
At one point, the BSE Sensex was up over 1,200 points and hit an intra-day high of 60,773.44 points. Eventually, however, the Sensex ended at 59,708.08 points, up 158 points or 0.3 per cent.
The NSE Nifty50 index hit an intra-day high of 17,972.20 points, but eventually ended 45.85 points or 0.3 per cent lower at 17,616.30.
Select banks, technology, capital goods and select FMCG stocks were among today’s gainers. ICICI Bank, HDFC Bank and HDFC rose around 1.50 per cent while SBI, IndusInd Bank and Bajaj Finserv were down between 3.9 per cent and 5.7 per cent. TCS, Infosys and Wipro rose around 1 per cent or more. But, automobile stocks like Tata Motors, Maruti Suzuki and Mahindra slipped more than 1 per cent. Reliance, NTPC, Titan and Sun Pharma were among the losers too.
“It was no different on the budget day as the markets once again were extremely volatile and Sensex gyrated nearly 2,000 points intra-day. At one point during the budget presentation, the benchmark index had vaulted nearly 1,200 points. But, a rout in the Adani Group stocks and nervousness ahead of the important Federal Reserve meet on interest rate punctured the rally and saw the index end mixed,” pointed Shrikant Chouhan, head of equity research (retail) at Kotak Securities.
Adani Group stocks, which had seen a huge sell-off last week after US-based short seller Hindenberg released a report accusing the diversified conglomerate of “brazen stock manipulation and accounting fraud”, had partially recovered on Tuesday after the follow on offer of Adani Enterprises got fully subscribed.
However, on Wednesday, there was a huge sell-off once again after news emerged that Credit Suisse has stopped accepting bonds of Adani Group as collateral for margin loans to its private banking clients. Shares of Adani Enterprises plunged 28.45 per cent to end the day at Rs 2,128.70.
Elsewhere, Adani Ports and Special Economic Zone tumbled 19.7 per cent, Adani Green was down 5.8 per cent and Adani Transmission fell 2.5 per cent. Adani Wilmar hit the 5 per cent lower circuit yet again and Adani Total Gas, too, hit its 10 per cent lower circuit level.
Cement companies ACC and Ambuja Cements, which Adani Group had acquired last year, also saw selling pressure.
The meltdown in Adani Group shares has eroded Gautam Adani’s fortunes, who has now slipped to 15th on the Forbes Billionaires list. Before the Hindenburg report was released, he was the third richest in the world.
Amid the rout, Adani Group has pledged more shares of its ports arm to lenders, according to Bloomberg. What steps Adani takes to lift the shares and investor confidence in coming days will have to be seen.
Life insurance companies – LIC, HDFC Life, ICICI Prudential Life and SBI Life also saw massive selling on Wednesday; their shares cracked between 8-10 per cent as investors were disappointed with the budget proposal to tax income from life insurance policies, other than ULIPs, with an aggregate premium amount of Rs 5 lakh per annum or more from the new financial year.
“This proposal is likely to dent the sales of non-participating products, which has been witnessing strong growth over the last few years. As the cap of Rs 5 lakh is applicable for all life insurance policies across insurers, it may deter individuals from purchasing additional policies if they have exhausted their limit with their primary insurer,” pointed Vignesh Shahane, MD and CEO of Ageas Federal Life Insurance.
Tarun Chugh, MD and CEO of Bajaj Allianz Life Insurance also said the move was “bit of a dampener” for insurance industry. He said discounting incentives on insurance plans would put further pressure on household financial savings to some extent.
The budget has taken away the tax-free advantage of high-value traditional insurance policies, making them less attractive for investments, agreed Cyril Charly, research analyst at Geojit Financial Services.
“The union budget has provided a higher impetus for individuals to shift to the new tax regime, which does not favour tax exemptions from investments in insurance schemes,” he further added.