No tinkering with the direct taxes, capital gains taxes or security transaction tax, and no announcement of Covid tax on super-rich left bulls untamed at the bourses who managed to entirely reverse previous week’s losses and clock the sharpest-ever Budget rally, in absolute terms, on Monday.
Besides, Finance Minister Nirmala Sitharaman’s focus on disinvestment, increased FDI exposure for the insurance sector, and a cleanup plan for stressed assets were among a few of the other confidence-boosting measures.
Overall, the market capitalization of the BSE-listed companies increased by Rs 6.78 trillion to Rs 192.9 trillion on Monday with 2,315 points, or 5 per cent, gain in the S&P BSE Sensex, which closed at 48,601 level. In the intra-day trade, the index zoomed nearly 2,500 points, hitting a high of 48,764.
The broader Nifty50 index also reclaimed the psychological level of 14,000 level and closed the session at 14,281.
The broader market peers, however, underperformed the benchmarks. Nonetheless, the S&P BSE MidCap index ended 3 per cent higher at 18,630 while the S&P BSE SmallCap index settled 2 per cent higher at 18,353.
Budget proposals nudged sectors like financials, insurance, and infrastructure with shares of financials including banks, non-banking housing finance companies (NBFCs), housing finance, and insurance companies soaring up to 20 per cent. ICICI Bank, IndusInd Bank, Shriram City Union Finance, IDBI Bank, and Bajaj Finserv rallied more than 10 per cent on the National Stock Exchange (NSE). Besides, LIC Housing Finance, State Bank of India (SBI), RBL Bank, AU Small Finance Bank, Bank of India, Housing Development Finance Corporation (HDFC), Bank of Baroda and Aavas Financiers surged between 7 per cent and 10 per cent.
Among infrastructure firms, mainly engaged in the business of roads and highways construction, shares of NCC rallied 13 per cent, Ashoka Buildcon jumped 9 per cent, KNR Constructions gained up 7 per cent, Dilip Buildcon soared 6 per cent, and Larsen & Toubro advanced 4 per cent.
That apart, the volatility index, India VIX, also cooled off 8 per cent to 23.3 levels supporting the underlying optimism which came despite higher borrowing and a wider fiscal deficit. The sentiment, analysts say, was on account of the positive measures to revive the Covid-19 hit economy. That said, while the fiscal deficit number and the gross borrowing estimates are a tad higher-than-expected, the money is being put to good use, they say.
The government plans to borrow around Rs 12 trillion in FY22 and has pegged fiscal deficit at 6.8 per cent of the GDP. The FM said the government will be borrowing an additional Rs 80,000 crore in this fiscal to meet its deficit for 2020-21, pegged at 9.5 per cent of the GDP. Therefore, the total gross borrowing this fiscal would be Rs 14 trillion.
A higher fiscal deficit anchor for the state governments, experts say, should allow them to prioritise capex and National Infrastructure Pipeline (NIP) funding, but add to the overall general government borrowings in the coming fiscal.
Going ahead, Ajit Mishra, VP-Research at Religare Broking expects this budget rally to continue but he advises market participants to be selective in their approach now. Investors, he says, should focus on global cues and corporate earnings to gauge market trajectory.