The , seen as uninspiring by market players, coupled with profit-booking, sparked a huge sell-off on Dalal Street on Tuesday, eroding over Rs 3 lakh crore in investor wealth.
Investors dumped shares in the , real estate and infrastructure sectors, which had seen steep gains in recent weeks on hopes of favourable announcements. The worry that the government, which has to battle a difficult fiscal situation, might disappoint in the Union Budget also spooked investors.
“If the railway budget is any indication, it is likely the Union Budget will be long on intention and short on action. That is what the market is worried about,” said Dalton Capital Managing Director U R Bhat.
The expenditure announced in the railway budget was much lower than the market hoped for, triggering concerns the government would slash spending. (HALTED IN THEIR TRACKS)
The 30-share dropped 518 points, or 1.98 per cent, from its previous close to end the day at 25,852.11. The National Stock Exchange’s declined 163.95 points, or 2.11 per cent, to 7,623.2. In percentage terms, both indices fell the most since January 27; in terms of points, the fall was the steepest since September last year. The broader markets saw a sharper correction, with the BSE mid-cap index dropping 3.63 per cent and the BSE small-cap index sliding 4.19 per cent.
Brokers said investors chose to take money off the table following spectacular gains since the election results.
Heavy selling was seen in sectors like , power, capital goods and metals. BSE’s realty and power indices fell the most — over six per cent each — followed by the metal and capital goods indices, which declined more than four per cent each. The decline for the BSE FMCG index was the lowest, at 0.5 per cent. Slashing of expenditure by the government, the biggest spender in the economy, could hurt companies in sectors like capital goods, market players felt.
Among Sensex stocks, crashed the most, at 8.2 per cent, followed by and , which dropped five per cent each. Analysts said the market had been a little too optimistic about the new government and its growth-reform agenda. The expectations had run too high, leaving room for disappointment.
“People expect the government to do everything in one shot. They will now have to start being more considerate… Given the state of the economy and the finance, the government cannot do much more than this,” said Bhat.
Interestingly, foreign institutional investors bought shares worth Rs 422 crore in the cash segment, while domestic investors sold shares Rs 400 crore worth of shares.
Weakness in the global markets added to the subdued sentiment. Most foreign markets closed with losses on Tuesday, even as the fall was not as sharp as in the domestic market.
Experts said stocks could continue to remain under pressure following the rail budget disappointment. “There could be some more pain left in the market in the near term. But buy-at-declines should be the strategy,” said Amisha Vora, joint managing director, .
“Other than a vague hope, there are few uniform ‘expectations’, given that no one knows what the government is working on. This means even a large-scale disappointment is unlikely. We expect the Budget to be a non-event for the broader market,” Neelkanth Mishra, India Equity Strategist at , had earlier said in a note titled ‘Union Budget: Too soon to expect fireworks?
On Tuesday, Indian Railway Minister  presented his first budget for Indian Railways.

The budget emphasized increased amenities for travelers, better safety, and timely completion of projects. There were no fare hikes announced as both passenger and freight fares had been increased last month. But, it was announced that fares will be revised twice a year to absorb fuel costs. Gowda criticized previous governments for announcing new projects and failing to complete them. He said projects will now be prioritized, such as decongesting major routes instead of announcing new ones. Gowda announced no major new projects, but announced 54 new trains. He also criticized the last government for driving the railways into a loss.

Gowda announced a bullet train between Mumbai and ; new semi-high speed trains in nine sectors connecting metros; and new measures towards improving cleanliness, food, and  were announced. He said  will be installed in major stations to monitor cleanliness, and major stations will have food courts serving local cuisines and precooked food from reputable catering brands will be served on-board. The railways have faced complaints of substandard food in the past.

He announced the introduction of a new rail-flaw detection system to better investigate the causes of accidents.  The budget allocated a significant sum to the construction of bridges at unmanned crossings, a major cause of rail-track deaths. He announced a new project to introduce automatic closing doors on mainline and suburban trains, and said  will be provided in larger stations and select trains.  will be available for on-board use for a fee by Business travelers. The e-ticketing system will be extended from booking tickets to booking coaches and entire trains, and also retiring rooms in stations. Electric mobility carts will be provided to elderly and handicapped passengers at all major stations.  Also,  will recruit four thousand female constables and escorted carriages will be provided for women. A significant amount was announced for improving rail connectivity in north-east India.

Gowda emphasized use of  (PPPs) to fund future projects. He also said he will ask the  to approve foreign direct investment (FDI) in Indian Railways. Some stations are to be improved using PPPs.  Manish R. Sharma, executive director of capital projects and infrastructure at , pointed out the budget didn't contain any information on how the government intends to attract private investors. Deven Choksey, managing director at K. R. Choksey securities, said the government now seemed to be more inclined towards PPPs than before. India's stock index  dropped and closed 2% below opening. Investors were observed selling shares in energy, infrastructure, and real estate sectors.