Budget sops boost Indian stocks

The Indian stock markets cheered the much-anticipated budget unveiled by Finance Minister Nirmala Sitharaman on Monday, showing bullish cues. The benchmark S&P BSE Sensex closed up 2,314.84 points, or 5 per cent, at 48,600.61 and NSE Nifty 50 index rose 4.74 per cent, or 646.60 points, to 14,281.20.

Analysts said the markets were largely happy with the various schemes Sitharaman announced across key sectors like healthcare, auto, infrastructure and agriculture.

Vijay Valecha, chief investment officer, Century Financial, said: “Markets saw the budget announcement as positive with various measures seen helping the economy in the longer run. Markets hugely cheered the proposal to raise the expenditure and allowing for a wider fiscal deficit during such turbulent times. One of the major positives was an increase in capital expenditure spend at 2.5 per cent of GDP for the current fiscal against 1.7 per cent last year. Other major positives were spending increases in housing, infrastructure, health and textiles sectors, along with the creation of a special asset management company for taking on existing bad debts/NPL present in the banking system.”

Markets especially cheered the absence of any increase in wealth tax and long-term capital gains on equity investments. Before the budget announcement, markets had expected a Covid-related surcharge. However, the budget kept the status quo intact as far as imposition of any additional taxes or surcharges is concerned. On the investment side, rationalisation of tax structures for foreign portfolio investors (FPIs), NRIs, Reits will go a long way in attracting fresh capital. On the Sensex chart, IndusInd Bank was the top gainer, rallying over 14 per cent, followed by ICICI Bank, Bajaj Finserv, SBI, L&T and HDFC. On the other hand, Dr Reddy’s, Tech Mahindra and HUL were the laggards.

Indian markets opened on a positive note tracking positive global bourses. During the afternoon session, the markets reacted positively to the budget. All the key market indices witnessed a sharp rise as investors welcomed the big infrastructure and healthcare boost provided in the budget.

According to Lav Chaturvedi, ED and CEO at Reliance Securities, the single securities market code announced in the budget speech will bring about ease of doing business in the Indian financial markets. This, along with the FDI regime and development of financial institutions, would be transforming for the financial markets, he added.

Sitharaman proposed more than doubling of healthcare spending while imposing a new agri cess on certain imported goods and raising customs duty on items ranging from cotton to electronics in a bid to pull the economy out of the Covid-induced trough. She also allocated Rs200 billion to recapitalise state-run banks that are saddled with bad loans and have been a drag on growth.

India’s fiscal deficit will now be 9.5 per cent against a target of 3.5 per cent for 2020-2021, and fiscal deficit for 2021-2022 is now targeted at 6.8 per cent. The finance minister is hoping for a fiscal consolidation only by the fiscal year 2026. M.R. Raghu, managing director, Marmore Mena Intelligence, said: “Of course, the market is celebrating for a reason, and the huge Capex push spurring infrastructure spending and healthcare push will trigger a wave of opportunities for many listed stocks. Recapitalising banks at this time when stress levels are extremely high is a good thing. Overall, a smart budget.”

Meanwhile, the Indian rupee depreciated by 6 paise to close at 73.02 (provisional) against the US dollar on Monday, tracking a rebound in the American currency overseas. At the interbank forex market, the domestic unit opened at 72.89 against the US dollar and witnessed an intra-day high of 72.84 and a low of 73.15. The local unit finally settled at 73.02, registering a fall of 6 paise over its previous close, even as the domestic equity market settled with significant gains on budget day. On Friday, the rupee had closed at 72.96 against the American currency.

Narendra Solanki, head, Equity Research (Fundamental), Anand Rathi Shares and Stock Brokers, said that during the afternoon session, the markets reacted positively to the budget. On the sectoral front, almost all the sectors were trading in the green post the budget presentation, except pharma which was trading in the red, he added.

Motilal Oswal, MD and CEO, Motilal Oswal Financial Services, said that the budget has been much better than the market’s expectations. The feared and anticipated measures around Covid cess/higher capital gains tax/wealth tax, etc did not materialise. This will provide a huge relief to the market and the economy and help sustain the buoyant sentiments in the economy.

“We believe this will push capex spending in the economy and augur well for the overall economic revival of India. The significant increase in allocation to the healthcare sector should lift the general well-being in the economy,” he added.

— sandhya@khaleejtimes.com