Indian markets have been under pressure since the Union Budget 2019 due to several key proposals by the finance ministry triggered a selloff. Benchmark BSE Sensex has declined 5 percent and NSE Nifty50 has slipped 5.4 percent since July 5, the budget day. The markets sentiment turned negative after Nirmala Sitharaman last week ruled out providing any relief to FPIs. On Monday, markets continued their losses for the third consecutive session after a 1.5 percent loss on Friday, dragged by weaker-than-expected Q1 earnings and selling by foreign investors. Here are the key five reasons
Hike in income tax surcharge for FPIs
In the maiden budget speech by finance minister Nirmala Sitharaman on July 5, she proposed a hike in the surcharge from 15 percent to 25 percent for individuals earning between Rs 2 crore and Rs 5 crore, and from 15 percent to 30 percent for the income above Rs 5 crore. Several FPIs, which are registered as a trust or an association of person, come under this income tax slab.
Ruling out any relaxation for the foreign portfolio investors (FPIs), Finance Minister on Thursday said that those FPIs who wish to be out of the net of the surcharge on high net worth individuals may consider the option of structuring as companies as the foreign portfolio investors registered as trusts will have to pay the new tax surcharge. This affected the foreign investors' sentiment who went on to a selling spree since Budget day.
Global market cues
Global markets turned negative after the
Wall Street Journal reported the Fed is likely to cut rates by 25 basis points when it meets later this month. The markets had anticipated a cut of at least 50 bps following dovish comments from Fed officials last week, reported Reuters. Flickering oil prices
International oil shipping route is facing concerns as Iranâs Revolutionary Guards captured a British-flagged oil tanker in the Gulf after Britain seized an Iranian vessel earlier this month. The move has increased the fear of potential supply disruptions in the Strait of Hormuz at the mouth of the Gulf, through which flows about one-fifth of the world's oil supplies. Brent futures have struggled to sustain a move above $65 a barrel and slumped about 7 percent last week, while U.S. futures have rarely moved above $60 a barrel.
Weakening of Indian rupee:
The rupee continues to slip against the US dollar on the back of buying in American currency by banks. On Monday, Indian rupee managed to trade above 0.20 paise to Rs 69 against US dollar.
Poor corporate earnings saga
The first quarter of this fiscal year saw poor corporate earnings till now. HDFC Bank saw rising net performing assets (NPAs) while YES Bank, Federal Bank, MindTree, Wipro and others disappointed the Street.
Analysts' take: Dipen Sheth, head-institutional research of HDFC Securities believes that weak macroeconomic data, the stress in the financial system and sluggish global macros are behind the ongoing selloffs in the stock market. âWe see troubled times and this is not just driven by some kind of sentimental downtick in the stock market, there is a big macro picture behind the softness that you see reflected in the markets, and the Modi 2.0 excitement and all that have fizzled out,â he said. "You look at consumer sentiment in India, you look at the macros in India below 6 percent growth print. You see persistent stress and stumbles in the Indian financial system which is like the lifeblood of the economy like in any other economy. That is reflecting across classes of the financial system,â he added.