In a sharp knee-jerk reaction to various tax proposals made by Finance Minister Arun Jaitley in his Budget 2016-17, the stock market benchmark Sensex crashed 660 points but recovered back to the positive territory on heavy buying by domestic institutions.
Reports about an imminent rate cut by RBI also helped improve the sentiment battered by the proposal for higher dividend distribution tax on those earning more and a proposal to increase Securities Transaction Tax in some categories.
The NSE Nifty also sank below the 6,900-mark during the Budget presentation, before recouping the losses.
In a trading marked by spells of volatility, the Sensex crashed to 22,494.61, a loss of 659.69 points, or 2.84 per cent.
The 50-share NSE Nifty dropped 203.95 points, or 2.90 per cent, to 6,825.80.
All sectoral indices were weighed down by widespread selling, with FMCG, consumer durables, IT and banking sectors falling by up to 3.02 per cent.
Banking stocks led by State Bank of India lost ground after the finance minister proposed a lower-than-expected Rs 25,000 crore to be provided for recapitalisation of public sector banks.
The sentiment took further hit after Jaitley proposed 10 per cent tax on dividend above Rs 10,00,000 and 0.5 per cent on Securities Transaction Tax on options, brokers said.
A weak trend in global markets only worsened mood.
Other losers that weighed on the key indices were ITC, Maruti Suzuki, Wipro, Hindustan Unilever, Infosys, Cipla, TCS, NTPC, ONGC, Sun Pharma, GAIL, Bajaj Auto, HDFC Bank and Axis Bank.
On the other hand, companies related to agriculture business caught buyers’ fancy and rose by up to 7 per cent after the finance minister announced an allocation of nearly Rs 36,000 crore for the farm sector and a higher credit target aimed at doubling farmer incomes in 5 years.
In the agri segment, Jain Irrigation, Kaveri Seed Company, Monsanto India and Rallies India were major gainers.