Indian stock market witness an increase in their volatility after the announcement of Budget 2024

India's stock market saw high volatility as the 2024-25 Budget announced increases in capital gains taxes. The Sensex and Nifty initially plunged but recovered significantly by closing. Experts predict short-term adjustments as markets adapt to new measures.

Today, share prices in India fluctuated vigorously owing to Union Finance Minister Nirmala Sitharaman’s announcement of the 2024-25 Budget as the India VIX volatility index rose up to 17. 52% intraday. The main response was purely due to the proposed changes in capital gains taxation.

During her budget speech, Sitharaman also stated that the existing long-term capital gains tax of 10% will be raised to 12%. 5% and short-term capital gains tax from 15% to 20 percent in the first year of implementation. These announcement triggered a sharp selloff: The benchmark BSE Sensex tanked 1,278 points to a low of 79,224 and the Nifty 50 tumbled 435 points to 24,074.

Pundits saw the tax proposals as moderately bearish, especially the measures on the taxation of share buyback income in the hands of recipients. In the analysis of the budget, Geojit Financial Services head Dr V K Vijayakumar remarked that while the STCG tax was raised sharply, the LTCG tax rise was moderate at best given the new exemption limit.

Although the market started falling as soon as it opened, it was quite surprising that it did not take long for the market to stabilize. The Sensex rose by more than 1,400 points from its low and the Nifty ended a whisker above the 24,000 mark at 24,018. The Nifty50 also bounced back in similar fashion, closing at 24,473. Other broader indices were also lower but most of the losses were cut as the midcap and small cap indices fell by 0. 55% and 0. 04% respectively.

According to the economists, the resultant decrease in the stock market will only be temporary as investors find ways to work around the new taxes. Shripal Shah, Chief Executive Officer of Kotak Securities, said that the tax changes are to bring down excessive activity that is currently being seen and to ensure better and sustainable growth of the stock market.

Also Read: Budget 2024: Special coverage on Bihar and Andhra Pradesh

The day’s proceedings were useful in showing the stock market how sensitive it is to fiscal policy decisions and their effects on its performance, especially in light of the current budget.