The Sensex and Nifty came under selling pressure on Monday as Dalal Street gauged the impact of LTCG tax on equities amid lower Asian markets.
Sentiment was dampened with traders and investors continuing their panic selling as the Sensex fell 546 points intra day to 34,520 level in early trade. But value buying in stocks led the recovery in markets which helped limit losses.
While the Sensex closed 309 points lower at 34,757, the Nifty fell 94 points to 10,666 level.
1,084 stocks closed higher compared with 1,687 stocks falling on BSE. 205 stocks were unchanged.
"Markets were trading at rich valuations for the last couple of months and thus have corrected post Budget. Market correction is likely to reduce the excesses that were happening where risk aversion was difficult to find," said Arun Thukral, MD & CEO, Axis Securities.
HDFC (4.06%), L&T (3.65%) and Kotak Bank (2.66%) were the top Sensex losers.
Among 19 sectoral indices, BSE bankex (333 points) and capital goods (528 points) were the top losers.
"Disappointments include budget provisions and lack of buying on small- and mid-caps, even at lower levels. Expect RBI to maintain the rates and its cautious tone during the policy meet this week," said Deepak Jasani, head of retail research at HDFC Securities.
Sensex fell 839 points on Friday a day after FM Arun Jaitley reintroduced Long Term Capital Gains (LTCG) tax for equity transactions in Union Budget 2018-19. Traders and investors unwinded long positions in equities ahead of the April 1, 2018 cut off date when LTCG tax of 10% on equities will be charged. The upward revision to the fiscal deficit target to 3.3 percent from 3 percent for 2018-2019 also dampened sentiment on February 2.
The indices extended losses on Monday on the impact of tax on the investments of traders and investors.
"Investors were disappointed with LTCG coming in over and above STT. However, Budget is aimed at spurring demand from rural India and masses going forward to take care of India growth story. Execution and implementation will be the key ahead," said Anita Gandhi, Whole Time Director, Arihant Capital Markets.
On the other hand, Bharti Airtel was the top Sensex gainer rising 4.20% or 17 points at 439.50 after the firm said Singapore-based telecom operator Singapore Telecommunications Limited or Singtel will invest Rs 2,649 crore in the company, increasing its stake in the Bharti Airtel promoter to 48.9 per cent. The investment comes at a time when telecom sector has witnessed an unprecedented consolidation following the tariff war after the entry of Reliance Jio.
Asian shares were mostly lower Monday, extending global stock losses after Wall Street's big sell off on deepening investor anxiety over rising bond yields and disappointing quarterly earnings.
Asian markets closed lower with Hang Seng falling 1.09% or 356 points, Nikkei down 2.55% or 592 points and Taiwan T Sec 50 Index losing 1.62% or 179 points.
Shanghai SE composite index was the only exception, rising 0.73% or 25.42 points to 3,487.50 level.
Market jitters spread after the US stock market had its worst day in two years on Friday, fueled by worries about inflation and rising Treasury yields. After an impressive 2017, US and many global stock markets had a strong start to the year, raising concerns they were overdue for a correction.
The S&P 500 fell 2.1 percent to close at 2,762.13 on Friday. The Dow Jones industrial average lost 2.5 percent to 25,520.96 and the Nasdaq slid 2 percent to 7,240.95.