Auto, banking and metal stocks emerged as the clear winners on the budget day

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as finance minister Pranab Mukherjee’s proposals to reduce taxes on salaried individuals and thrust on infrastructure and recapitalisation of government-run banks whipped up investor sentiment in these sectors.

But the biggest story of the day featured non banking finance companies (NBFCs) after the finance minister voiced the government’s desire to open up the banking sector to NBFCs and the private sector by issuing fresh licenses.

Reliance Capital (up 8.12 per cent to Rs 786.45), Aditya Birla Nuvo (up 4.25 per cent to Rs 840.85), Mahindra & Mahindra Financial Services (up 4.22 per cent to Rs 336.75), Bajaj Finserv (up 4.25 to Rs 346.15) and Shriram Transport Finance (up 6.90 per cent to Rs 460.70) were among the major winners of the day. These companies are prospective candidates to enter the banking sector. Shares of smaller public sector banks like Corporation Bank, Indian Bank, Allahabad Bank and UCO Bank gained between 3-6 per cent on the recapitalisation news.

Shares of tobacco major ITC lost 6.17 per cent to end the day at Rs 232.05 as the government hiked excise duties on cigarettes and other tobacco products. The benchmark Sensex, which was up by about 83 points before the budget, extended the gains to 415.05 points by the end of the budget speech as investors cheered the change in personal income tax slabs as it would translate into more disposable money with consumers. "It would result in more money in the hands of consumers, boosting demand for homes and automobiles," said Nirmal Jain, chairman of Mumbai-based India Infoline.

Profit booking towards the end by traders ahead of the 3-day holiday in the market, however, pared the early gains as the Sensex ended at 16,254.20, up by 174 points.

“Lower fiscal deficit, boost in domestic consumption through reduction in personal taxes and roadmap for major reforms like direct tax code and goods and service tax are the key positives for the market,” Jain said. Gainers from the auto pack included Tata Motors (up 6.33 per cent to Rs 711.05), Mahindra & Mahindra (up 5.06 per cent to Rs 1,007.36), Hero Honda (up 4.99 per cent to Rs 1,772.15) and Maruti (up 4.46 per cent to Rs 1,463.35).

The thrust on infrastructure boosted metal stocks such as Sterlite Industries (up 3.97 per cent to Rs 781.05) and Hindalco (up 5.39 per cent to Rs 161.25).

“Auto is one sector that will benefit from consumer spending,” said Andrew Holland, CEO, institutional equities at Ambit Capital. “The budget outlines the long-term India growth story, but for the short-term we think the market will be volatile,” he added.

“Just a partial withdrawal of the stimulus package and reduction in personal income tax saw enthusiasm in early trade,” said CJ George, managing director of Geojit BNP Paribas Financial Services. “Concerns of fiscal deficit were mitigated after the concrete roadmap to bring down the deficit to 4.1 per cent of the GDP by 2012-13 was announced,” he added.