Indian stocks fell the most in a week after the government proposed higher taxes on stock market transactions and waivers of some farm loans. Reliance Industries Ltd. and ICICI Bank Ltd. led declines.
India plans to increase the short-term capital gains tax, or the levy on securities held for less than a year, to 15 percent from 10 percent, Finance Minister Palaniappan Chidambaram said in today's annual budget.
``Markets are obviously not happy with the capital gains tax,'' said A. Balasubramaniam, chief investment officer at Birla Sun Life Asset Management Co., which manages $8.1 billion in assets in Mumbai. ``Also, a lot of sops have been given to farmers so investors will want to see how he's going to make up for it in terms of collections.''
The benchmark Sensitive Index, or Sensex, fell 245.76, or 1.4 percent, to 17,578.72. Seven stocks declined for every three that climbed. The Sensex climbed 1.3 percent this week. The S&P CNX Nifty Index fell 61.60, or 1.2 percent, to 5,223.50.
Reliance, owner of the world's third-biggest oil refinery, slid 78.45 rupees, or 3.1 percent, to 2,458.25. Infosys Technologies Ltd., India's second-largest computer-services provider, fell 52.55 rupees, or 3.3 percent, to 1,546.85. The two stocks account for about a fifth of the index.
State Bank of India led gains in state-run banks, reversing earlier losses on speculation the government will compensate lenders after proposing to scrap 600 billion rupees ($15 billion) of loans to small farmers.
Bank Compensation
``The view is that the banks will be fully compensated,'' said Rana Kapoor, chief executive officer at Yes Bank Ltd., the country's fastest-growing financial services company by assets. ``If done, it cleans up the banking system as well.''
State Bank rose 71 rupees, or 3.5 percent, to 2,109.7, after falling as much as 4.2 percent. Union Bank of India added 6.15 rupees, or 3.4 percent, to 185.65, reversing a 5.3 percent decline. Punjab National Bank Ltd. climbed 22.85 rupees, or 3.9 percent, to 604.15, reversing a 6.7 percent drop.
Chidambaram said after the close of the market that the government will provide cash to banks to compensate them for the loan waivers.
The following stocks rose. Stock symbols are in parentheses after company names.
Hospitals: India will grant a five-year tax exemption for setting up hospitals, especially in smaller Indian cities, to encourage the availability of health care in rural areas.
Apollo Hospitals Enterprise Ltd. (APHS IN) gained 6.2 rupees, or 1.3 percent, to 495.65. Fortis Healthcare Ltd. (FORH IN) added 5.9 rupees, or 7.4 percent, to 85.25.
Automakers: Maruti Suzuki India Ltd. (MSIL IN) rose 32.25 rupees, or 3.9 percent, to 867.2. Bajaj Auto Ltd., the nation's second-largest motorcycle maker, gained 60.55 rupees, or 2.7 percent, to 2,280.15. India's government cut the excise tax on small cars, buses, motorcycles and scooters to 12 percent from 16 percent, Chidambaram said.
