Reuters: Shares dropped on Thursday, weighed down by foreign sell-offs and profit-taking mainly in construction shares, while the rupee ended weaker.
The rupee fell 0.17% to 181.40/50 per dollar, compared to Wednesday’s close of 181.10/35, Refinitiv data showed. It is up 0.7% so far this year.
The benchmark stock index closed down 0.73% at 6,160.88, its lowest since 27 November. The bourse gained 1.5% last week, and is up 1.79% for the year.
The index touched its highest level since 25 June 2018 on Monday, lifted by hopes of booming economic activities after the new Government last week cut some key taxes.
Analysts said the recent tax reduction has already been factored in and the market was waiting to see the impacts of the new policy. They said investors sold construction shares and these were rising on hopes the new government will encourage a construction boom.
The Government on 27 November reduced value-added tax to 8% from 15% starting 1 December, and abolished some other taxes as well in its attempt to boost economic growth that has fallen to a near two-decade low.
Emerging Asia Economics, in a note on Monday, said the tax cut decision would provide a significant boost to the economy, but put increased strain on the country’s fragile public finances, with a possible loss of $ 2 billion in revenue.
Foreign investors were sellers on Thursday in the equity market for the 26th session out of last 29.
They sold a net Rs. 27.8 million ($ 154,444) worth of shares on Thursday, extending the year-to-date foreign outflow to Rs. 10.8 billion, according to index data.
Equity market turnover was Rs. 1.2 billion, more than this year’s daily average of about Rs. 728.5 million. Last year’s daily average was Rs. 834 million. Foreign investors were net buyers of government securities on a net basis for the sixth straight week, purchasing a net Rs. 4.3 billion worth of government securities in the week ended 27 November.
Total foreign outflows from government securities through 27 November stood at Rs. 43.7 billion, according to Central Bank data.