The benchmark indices posted their biggest absolute points gain on the budget day as finance minister Nirmala Sitharaman desisted from announcing any Covid tax and unveiled what the market interpreted as a mix of reforms and growth-oriented proposals.
Investor wealth skyrocketed to Rs 6.34 trillion with the Sensex jumping 2315 points.
Market circles are not ruling out the possibility of the 30-share index again hitting the 50000-mark in the coming days.
Although the budget did not contain any measures to lift consumption, experts said investors would now focus on the upcoming monetary policy where the Reserve Bank of India is expected to continue with its accommodative stance.
The mood was cautious ahead of the budget owing to concerns that the finance minister could announce some additional cess or a Covid-19 tax to make up for the shortfall in receipts. Expectations were also muted as Sitharaman had so far refrained from announcing big-bang stimulus measures.
Last week, the Sensex had crashed 2593 points, giving up all the gains it earned from better-than-expected corporate results, robust FPI (foreign portfolio investment) inflows and a recovery in the economy this year.
A key highlight of Monday’s trading was that the benchmark indices were in the green throughout the trading session unlike in the past budget sessions where they turned volatile in line with the proposals made.
The Sensex opened in the green at 46617.95 and remained at a higher level as the finance minister announced reforms such as a hike in the foreign direct investment (FDI) limit in insurance to 74 per cent from 49 per cent, privatisation of two state-owned banks and a general insurer and the formation of an entity to acquire the toxic loans of banks among others.
The Sensex did exhibit some weakness over fears of more taxes, but zoomed to hit an intra-day peak of 48764.40 when the apprehensions were proved to be unfounded after Sitharaman’s speech and ended 2314.84 points, or 5 per cent, higher at 48600.61.
The broader Nifty soared 646.60 points, or 4.74 per cent, to finish at 14281.20.
“The finance minister has given a budget which is better than market expectations. In line with the stated priority of the government, the budget focuses on an increased thrust on infrastructure and other supply-side measures to accelerate manufacturing in the country. There were no major changes on the direct tax code, which was taken very positively by the market, though the lack of any demand-side push was a disappointment,’’ Gaurav Awasthi, senior partner at IIFL Wealth Management, said.
Banking and finance stocks were the star of Monday’s trading with IndusInd Bank leading the list of percentage gainers in the Sensex by gaining 14.75 per cent. It was followed by ICICI Bank, Bajaj Finserv, the SBI, Larsen & Toubro and HDFC which rose up to 12.50 per cent. Only three stocks in the Sensex ended in the red.
The Nifty bank index climbed by 8.26 per cent.
“A budget with no changes in direct taxes will certainly be remembered for years to come. The equity market will be enthused with no tinkering in capital gains taxes or STT or any form of Covid tax,’’ Krishna Kumar Karwa, managing director of Emkay Global Financial Services said.
Market circles said the movement of stocks in the immediate term would be dependent on FPI inflows and the upcoming monetary policy later this week. However, they pointed out that the budget has given a good foundation for the next leg of the rally.
“The markets will soon digest the budget and move on to the fundamental factors and global cues. Corporate earnings in the third quarter of this fiscal have been above expectations and is expected to see robust growth of around 30 per cent (for the Nifty index) in 2021-22. Even though market valuations are elevated, the recovery in corporate earnings and the easy liquidity scenario globally may help to support valuations for some time. Overall, 2021-22 will be the year of normalisation (from the Covid-19 pandemic) and will act as a stage for acceleration in future growth,’’ Sampath Reddy, chief investment officer, Bajaj Allianz Life said.