After hitting all-time high on January 29, benchmark indices tumbled almost 3.5 per cent in just four trading sessions. The government in budget projected a of 3.5 per cent of GDP for current fiscal against the earlier target of 3.2 per cent which also accelerated pace of selling by participants.
The index had retreated from its lifetime high by falling 249.52 points in the previous session.
Mumbai: Though the benchmark BSE Sensex regained the 36,000-mark by rebounding over 171 points in opening trade ahead of the Union budget, markets fell somewhat after the document was read by Finance Minister Arun Jaitley on Thursday.
The S&P BSE Sensex slid 2.3% or 840 points while the NSE Nifty50 ended the day with 256.30 points or 2.33%.
"Reaction of FPIs and the bond markets locally to the 3.3% fiscal deficit proposed in FY19 will be keenly watched in the background of rising rates overseas", he added.
The government appeared to brush off the market's sharp reaction as an adjustment to the Budget's proposal and argued that the intent behind reverting to the LTCG tax was to bring about parity in tax treatment of different asset classes and ensure that equities that have delivered good returns must also contribute to the tax kitty.
The MSCI world equity index, which tracks shares in 47 countries, was down 0.3 per cent.
"It is easy to say hey, you made so much money, paying 10 per cent tax is not a big deal, but an equity investor operates around huge risks".
Meanwhile, domestic institutional investors (DIIs) sold shares worth Rs 358.50 crore, while foreign portfolio investors net bought shares worth Rs 1,099.780 crore yesterday, as per provisional data.
Top gainers on Thursday included M&M, Eicher Motors, Bajaj Auto, Bajaj Finance, L&T, Asian Paints and IndusInd Bank while Sun Pharma, ONGC, Dr Reddy's Labs, SBI, ICICI Bank, Aurobindo Pharma and Lupin were among the losers.
In Asia, Japan's Nikkei ended lower by 0.83 per cent, while Shanghai Composite Index shed 0.21 per cent. Hong Kong's Hang Seng, however, rebounded 0.86 per cent.
The small- and mid-cap stocks were hammered badly as many of them had risen too fast with their business fundamentals failing to keep pace with valuations.