The year 2017 was a relatively good year for investors in the stock market, especially ace investors who saw their stock portfolio rise many-fold. However, the global market rout today may be indicative of the winning streak coming to a halt. On Tuesday, the stocks investors - already disappointed over Finance Minister Arun Jaitley's proposal to levy the LTCG (Long Term Capital Gains) tax - faced double whammy after both the Sensex and Nifty felt the ripples of a global downfall as Wall Street suffered its biggest decline since 2011.
The Sensex closed 561 points (around 1.61 per cent) lower at 34,195 today after recovering from a fall of over 1200 points in the morning. Nifty also fell 168 points (around 1.5 per cent) at 10,498 level. Top investors and traders, including Rakesh Jhunjhunwala, Ashish Kacholia and Dolly Khanna, saw their stock portfolio fall up to 32 per cent. According to a report in Economic Times, all the gains made this year have been lost due to the sudden market crash. The BSE Sensex touched an all-time high of 36,283 on January 29, but saw consistent downfall of over 2000 points after the Budget.
The portfolio stocks of Rakesh Jhunjhunwala, considered as India's Warren Buffett, have seen around 32 per cent decline. Aptech, Prozone Intu, GeojitBSE, Financial Services, MCX and Anant Raj - all of his favourite stocks fell 25 per cent in their stock value.
Many stocks of investor Dolly Khanna's portfolio, including Sterling Tools, Dwarikesh Sugar, Emkay Global Financial Services and Ruchira Paper, fell by over 19 per cent. Experts suggest investors were already wary of the monetary policy review outcome on Wednesday, but fears of higher interest rates and impact of rising inflation in the US led to the selloff in global markets.
During a recent TV interview, global investor Jim Rogers had said levying of the LTCG tax by the Indian government is a mistake. He added the LTCG tax would not benefit the country, which is in a dire need of domestic as well as foreign capital. Claiming he would not invest in India in 2018, Rogers had said the tax proposal would discourage foreign investment.
Shake-up due to global factors: Hasmukh Adhia
Clearing the air around the long-term capital gains (LTCG) tax, Finance Secretary Hasmukh Adhia said the LTCG tax proposed in the Budget was fully justified and that the market shake-up happened because of the global factors, which shook global capital indices.
"Between February 2 and February 5, the global stock markets were affected between 3.8-6 per cent whereas Nifty and Sensex fell between 3.2 per cent and 3.36 per cent, respectively, which implies the imposition of the LTCG tax can't be related to disruption in the Indian stocks." He argued that had the LTCG had consequential impact on the Indian stock markets, the country's FIIs and FDIs flows would have turned adversarial. "But the fact remains that both the FIIs and FDIs continue to be inclined towards India," he said.
The Budget 2018-19 has reintroduced the provision of taxing long term capital gains after a gap of 14 years. From April 1, 2018, a 10 per cent of the LTCG tax will be levied on the sale of shares worth Rs 1 lakh. However, all gains made up to January 31, 2018, have been grandfathered -- meaning no tax will be imposed till that date.