The market snapped its six-day losing streak, as the BSE Sensex surged more than 2,300 points after Finance Minister Nirmala Sitharaman spelled out the Modi government’s plan for economic recovery in her Budget 2021 tabled in Parliament on February 1.
The banking, auto, financial services, metal and realty indices gained 4-8 percent as the minister announced a string of measures to shore up the economy.
There were no new taxes other than an agriculture infrastructure cess on “some goods”. There has been no change in personal and corporate tax, wealth tax, STT or LTCG. The proposal for the divestment of two PSU banks along with one general insurance company also lifted the market sentiment.
“The Budget is in the right direction. Privatisation, divestment (including two PSU banks and one general insurance company), monetisation of assets (including lands). But the government needs to ensure the smooth implementation of all these projects,” Deepak Parekh of HDFC told CNBC-TV18.
“If the government goes for LIC divestment of just 10 percent, then such a large announcement can take (care of)the major portion of capital expenditure target of the government,” he added.
Nirmal Jain of IIFL also said the budget was good and didn’t hurt tax payers.
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The BSE Sensex rallied 2,314.84 points, or 5 percent, to 48,600.61, and the Nifty50 jumped 646.60 points, or 4.74 percent, to 14,281.20.
“This is an excellent Budget and very very good for India. Fiscal deficit to GDP is high but the government needs to spend more on infrastructure (roads, bridges, electrification), healthcare,” Mark Mobius of Mobius Capital Partners LLP told CNBC-TV18.
“I think once this money gets into the economy, it will be very good for India. This year is good for stock market performance,” he said.
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In her Budget speech, Sitharaman announced Rs 1.75 lakh crore divestment target, big investment for road projects and infrastructure sectors (including railways, National Infra Pipeline project), an exemption for affordable housing segment and a push for Swacch Bharat Mission etc.
The government revised the expenditure target for FY21 to Rs 34.50 lakh crore. “FY21 fiscal deficit is pegged at 9.5 percent of GDP and 6.8 percent for FY22.
“We will hope to get to back to fiscal consolidation path by FY26 and fiscal deficit will reach below 4.5 percent by FY26,” Sitharaman said.
IndusInd Bank, ICICI Bank, SBI, Axis Bank, Bajaj Finserv, UltraTech Cement, HDFC, M&M, L&T, Bajaj Finance, HDFC Bank, Kotak Mahindra Bank and Titan were the biggest gainers among BSE Sensex, rising 5-15 percent.
Dr Reddy’s Labs, Tech Mahindra and HUL were the only losers in the BSE Sensex.
The broader markets also joined the rally, with the Nifty Midcap 100 index rising 3.3 percent and smallcap 100 index up 2 percent.