Equity benchmarks of the Bombay Stock Exchange and National Stock Exchange soared in post-budget trade in Dalal Street as market participants, including brokerages, gave a big thumbs up to the interim budget presented by the BJP-led NDA government regardless of rise in the fiscal deficit target for 2018-19 from 3.3 per cent to 3.4 per cent of the GDP on account of rise in the government’s total annual spending to Rs 27.84 lakh crore in FY 2020.
Not only equity and currency markets, but bankers and corporate leaders commended the wider spectrum of society — particularly farm, rural and middle-class — covered by the budget trying to play down the fiscal slippage in the government’s spending. Banker Deepak Parekh said such slippage was unlikely to breach fiscal discipline as long as GDP growth is sustained between 7.5 to 8 per cent. He praised the sops announced to housing and construction industry by Piyush Goyal, a first chartered accountant to do so. They also highlighted the government’s efforts to keep current account deficit under 2.5 per cent.
However, the initial buoyancy or euphoria withered in the afternoon trade which was also being blamed on profit booking at higher level since Nifty benchmark had regained 10,900 status. Kotak AMC’s Nilesh Shah welcomed the concessions granted to realty sector. The FM has extended unsold inventory period to two years which will give boost to the housing sector, he said.
This would enable the sector to bottom out via pick-up in home buying. Senior analyst at veteran domestic brokerage of Nanglia Firm Pawan Dharnidharka said Goyal’s expectations that the government aimed at increasing revenue income by better compliance of Goods and Services Tax sounded convincing considering the GST collection in the first month of 2019 (January) crossed Rs 1 lakh crore.
He said other measures aimed at netting more revenue would be tested over the next three months and would be reviewed — if off the mark — when a full budget is presented in July. The broker pointed out sharp rise in stocks of Indiabull, Godrej Properties, Oberoi Builders and several other big construction companies. All these shares were more than 3 per cent up intra-day.
The 30-share Sensitive Index of BSE and 50-scrip Nifty of NSE which were rangebound but with upside momentum took off for bigger gains in the post-budget speech trade. Analysts say the budget has been in line with Dalal Street’s expectations as the benchmarks have been factoring in pro-farmer and middle class budget proposals over the past 15 days. The interim budget exceeded those expectations in some key areas such as upside revision in Income Tax exemption limit to Rs 5 lakh from Rs 2.5 lakh. Markets welcomed this as it would provide considerable extra-expendable funds to middle-class as well as farm and rural segments to spend on items of popular consumption. Stocks of tractor makers such as Escorts Limited and Mahindra and Mahindra increased more than 2 per cent. Stocks of two-wheeler and car makers also gained. Markets also expect FMCG, consumer durables share to gain from these budget provisions.
The banking sector, however, was disappointed to find no mention of fresh capital infusion in state-run lenders. A budget-eve report by State Bank of India released on Thursday mentioned that banks would at least require Rs 50,000 crore in 2019-20 to enable them to achieve credit growth of 11 per cent. Bank shares languished in the post budget rally regardless of SBI announcing Rs 3,954.8 crore profit in October-December quarter against the loss of 2,416.4 crore for the same quarter previous FY. Bank Nifty did rise above 27,500-level to 27,533.05 (+237.60) points intra-day mainly on rise in private bank shares but gave up gains later in the day on profit booking. Analysts say Nifty Bank may stage a comeback next week as more Q3 numbers are announced. Besides, RBI has lifted curbs on three more state-run banks who were among 11 lenders brought under PCA or prompt corrective action banning them from opening new credit lines to all categories of borrowers.
The market had little time to react positively to the latest PMI or purchasing managers index data released by a private agency Nikkei IHS Markit. PMI in January rose to 53.9 from 53.2 in previous month. Agency’s chief analyst Pollyanna De Lima observed, “The manufacturing industry in January made up for ground lost at the end of 2018 with new business and production expanding at rates not seen for over a year.”
The Sensex which shot up to 36,778.14 (+521.45) points closed 36,469.43 (+212.74) points up 0.59 per cent. Nifty jumped intra-day to 10,983.45 (+152.50) points before ending the week at 10,893.64 (+62.70) points, an increase of 0.58 per cent. Nifty Bank settled at 27,085.95 (-209.50) points down 0.77 per cent. In Sensex 22 shares moved up and eight down. For Nifty the ratio was 34:16.
Gainers in BSE benchmark included Hero Motocorp Rs 2,807.30, 7.47 per cent; Maruti Suzuki Rs 6,938, 4.68 per cent; RIL Rs 1,251, 1.95 per cent; and Kotak M Bank Rs 1,268, 1.18 per cent.