Mumbai: The benchmark stock indices dropped nearly 1 per cent in morning trade due to selling in banking, auto, financial and telecom stocks after the budget proposal to impose a long-term capital gains (LTCG) tax on equity gains of more than Rs 1 lakh.
The 30-share BSE Sensex dropped by 328.24 points or 0.91 per cent to 35,578.42 in morning trade as 25 of its constituents declined.
The NSE Nifty fell below the key 11,000-mark as 38 of its components dropped. The 50-issue Nifty was trading down by 96.35 or 0.87 per cent at 10,920.55 at 1000hrs.
Among major losers, private banks Kotak Bank, IndusInd Bank Yes bank, Axis Bank, ICICI Bank and HDFC Bank fell up to 2.9 per cent.
Adani Ports, HDFC, L&T and Reliance Industries, Maruti, SBI, Bajaj Auto, M&M, Coal India and NTPC also declined up to 2 per cent.
IT major TCS and Infosys and drug makers Sun Pharma and Dr Reddy's, however, posted gains of up to 1.20 per cent on a weaker rupee.
Sentiment took a hit after Finance Minister Arun Jaitley yesterday announced long-term capital gains tax of 10 per cent on stock market gains exceeding Rs 1 lakh.
A weak trend in Asia also came as a dampener, traders said.
With the Budget out of the way, the focus turns to RBI's monetary policy to be released later this month.
Japan's Nikkei was down 1.30 per cent while Shanghai Composite Index shed 0.40 per cent in early trade today. Hong Kong's Hang Seng, however, up 0.20 per cent.
Most of the US stock indices dropped overnight after concerns over political crisis and rising US Treasury yields.