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How the Budget affects the Sensex

February 06, 2008

Sensex in Feb 2002

On February 28, 2002, stocks fell across the board as the market felt government's Budget proposals were against investors' interests. The index closed down 3.87 per cent at 3,562 points.

The government proposed to tax dividends after they had been distributed to investors instead of taxing companies and mutual funds. The carnage at Godhra, Ahmedabad and other parts of Gujarat also affected market sentiment on that day.

Sensex in Feb 2001

In 2001, however, the Sensex shot up 177 points on Budget day. The Budget turned out to be a bonanza for investors: FII limit was raised to 49 per cent, administered interest rates were lowered, and the surcharge on corporate taxes and the dividend tax too were reduced.

Sensex in Feb 2000

The Sensex saw its second biggest fall on a Budget day on February 29, 2000. The Sensex shed over 350 points during intra-day trading but recovered to close with a loss of 294 points. The Budget had proposed the imposition of a tax on exports, a hike in corporate and mutual fund dividend tax rates to 20 per cent and a higher surcharge on non-corporate assessees.

Image: The bronze bull installed outside the Bombay Stock Exchange.

Photograph: Pal Pillai/AFP/Getty Images

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