Indian equities reversed earlier advances to settle lower on Wednesday. Insurance companies had the biggest declines after the country’s Union budget proposed limiting tax exemptions for insurance proceeds. Adani Group shares also saw significant declines.
The bluechip Nifty 50 index (.NSEI) fell 0.26% to settle at 17,616.30, marking the largest down on budget day since a dip of 2.51% in 2020. The S&P BSE Sensex, on the other hand, increased 0.3% to 59,708.05.
The benchmark stock indices increased by as much as 2% earlier in the session as a result of Finance Minister Nirmala Sitharaman raising the personal income tax rebate maximum from 500,000 to 700,000 rupees ($8,550).
After Sitharaman later suggested a tax on the total returns at maturity of life insurance policies, excluding ULIPs, issued on or after April 1, 2023, if the combined premium of such policies was greater than 500,000 rupees a year, they later reversed those gains.
According to Vinod Nair, Head of Research at Geojit Financial Services, “Life insurance players observed substantial selling as the budget pushed for the new tax system, making insurance products less tempting as a tax-saving instrument.”
The shares of Max Financial (MAXI.NS), SBI Life Insurance (SBIL.NS), Life Insurance of India (LIFI.NS), General Insurance Corp (GENA.NS), and HDFC Life (HDFL.NS) all fell between 8.5% and 12.5%.
As the selloff in the Adani Group persisted, shares of Nifty 50-listed Adani Enterprises (ADEL.NS) and Adani Ports and Special Economic Zone (APSE.NS) fell by a combined 28.2% and 19.2%, bringing the total losses since the release of the Hindenburg report to $84 billion.
PSU banks (.NIFTYPSU), the biggest losers among the 13 major sectors, fell as much as 9.5% before recovering part of their losses to close down 5.7%.
Metal stocks (.NIFTYMET) ended the day down 4.5%, primarily due to Adani Enterprises’ decline.
The conclusion of the U.S. Federal Reserve meeting, which could signal an end to interest rate hikes at its meeting later in the day, will be eagerly watched by Indian investors.
$1 is equal to 81.8680 Indian rupees.