The Telegraph
Since 1st March, 1999
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Markets wait for the dollops to sink in

Mumbai, Feb. 28: The markets looked askance at Jaswant Singh’s benevolence, ending on a flat note after the finance minister did not walk the extra mile to take off investment fetters on public sector banks, though he came through on a widely expected end to dividend tax.

Dalal Street preferred to take a cautious line before it erupts into a celebration over a budget that made cement expensive, cars cheaper and drug research easier.

The Bombay Stock Exchange (BSE) sensex ended with a modest gain of six points (0.19 percent) at 3,283.66 points after rising as much as 1.2 per cent. It had touched an intra-day high of 3,316.74 and a low of 3,269.80; the broader NSE Nifty closed 10.42 points up at 1,063.40.

Operators are waiting till Monday before they decide to join the bandwagon and pick up fresh shares. One of the reasons is that the exemption from long-term capital gains tax will kick in the next financial year.

Arun Kejriwal of Kejriwal Investment & Research Services said: “On the face, it looks good. But the negatives are the increase in service tax and extending the net to include 10 new items. It is more than double the relief that has been offered by the finance minister.”

PSU bank shares took it on their chin. State Bank lost a whopping 5.7 per cent to Rs 285.75 after the finance minister did not hike its FII ceiling from 20 per cent. However, private banks, where foreign investors can now hold to 74 per cent without curbs on voting rights, turned out to be one of the top draws of the session.

Pharmaceutical and health care scrips firmed up, following the announcement that the concessional duty rate of 5 per cent will be extended to more life-saving drugs.

Dr Reddy’s was up 2.53 per cent at Rs 878.90 while healthcare major Apollo Hospitals was up 12.61 per cent at Rs 112.50. Shares of Telco, Mahindra & Mahindra zoomed, propelled by cuts in excise duty on cars to 24 per cent; two-wheeler majors Hero Honda and Bajaj Auto also advanced.

Cement firms lost ground, dragged down by the increase of Rs 50 per tonne in excise duty. Hotel scrips ended higher; Indian Hotels was up 8.60 per cent at Rs 207.10, while EIH shot up by Rs 4.91 per cent at Rs 179.40. The reason: hotels will not pay service tax any more.

That over-bought punters were being liquidated was evident from the fact that there were 676 losers against to 620 gainers on a volume of 112 million shares, the highest this year. “It is natural that the ripples will be felt in the cash market when the derivatives segment sees correction”, a fund manager said. Analysts cited transparency, tax compliance, commitment to reforms and increase in urea prices as proof that reforms were on course. “The change in finance minister has helped. Today however, bull liquidation was behind the markets’ tepid response,” a dealer said.

Even so, most sops were expected and discounted by operators as the finance minister scrapped taxes on capital gains on equities and dividends in the budget for 2003-04.

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