NIFTY50 and SENSEX decline sharply amid jitters over capital gain tax and STT hikes

Indian equity benchmark indices witnessed a significant decline on Tuesday following Finance Minister Nirmala Sitharaman’s announcement of increased Capital Gains Tax and an upward revision of the Securities Transaction Tax (STT) on Futures and Options (F&O) trading. The NIFTY50 index has registered its sharpest decline since June 4, and it has slipped below the 24,200 level for the first time in five trading sessions. Similarly, the SENSEX plummeted over 700 points, dropping below the 80,000 mark. Meanwhile, the India VIX has also crashed by nearly 10%, slipping below the 14-mark.

Short-term capital gains on some financial assets will attract 20%, and long-term capital gains on financial non-financial assets will be taxed at 12.5% from earlier 10%. However, the exemption limit for capital gains on some financial assets has been increased to Rs 1.25 lakh per year as against an exemption of up to Rs 1 lakh per year.

Among the stock-specific action, shares of Titan Company surged over 3% on Tuesday following the Finance Minister's announcement to reduce customs duties on gold and silver. The custom duty on gold in India will be lowered to 6%, expected to benefit both Titan and the broader industry. This reduction in duty will decrease the cost of gold, potentially driving higher consumer demand for the precious metal.

Among the sectoral indices, barring Nifty FMCG (+1.66%), all other sectors were seen trading in red, led by Nifty Metal (-1.6%) and Nifty Oil & Gas (-1.53%).

Broader markets also witnessed a sharp decline with Nifty Midcap 100 and Small-cap 100 down by 1.26% and 1.90%, respectively. The market breadth is extremely weak, with 1,829 stocks advancing and 472 stocks declining.