Jaitley proposals meets market expectation

The equity market gave a big thumbs up to finance minister Arun Jaitely’s budget with the BSE Sensex surging 485.68 points, or 1.76 per cent to close above the 28k-mark.
The market surge after finance minister Arun Jaitley unveiled the budget with a range of incentives for companies and measures towards boosting infrastructure and rural economy.
While the Sensex gained 485.68 points, or 1.76 per cent to close at 28,141.64, the NSE Nifty 50 rose 155.10 points, or 1.81%, to end at 8,716.40.
After a tepid morning, the market surged after the finance minister’s Budget speech as the street cheered since there was no change in corporate taxation and capital gains.
A big relief came to market as there was no mention of long-term capital gains tax in the budget speech as was the worried by investors, triggering huge buy. Firmness in global stocks also supported the rally.
Banking, auto and agri-focussed stocks remained in the limelight as the expectations of rate-cut have increased with food prices stable. Auto stocks gained as the focus on the rural sector and cut in tax rate on household incomes in the budget will boost demand.
For market operators, the budget has come along expected lines on most fronts. It has delivered on expectations of increased spend on infrastructure as well as on agriculture and rural areas. And for the markets, the fiscal deficit of 3.2 per cent was a big positive as it means interest rates can be lower further during the next fiscal.
“The finance minister has done a balancing act amidst gloomy global growth, emerging trade uncertainties, rising oil prices and demonetisation worries. There was something for everyone in the budget. The proposal to allow listing and trading of security receipts is a game changer in the asset reconstruction space,” Vishal Kampani, managing director, JM Financial Group said.
He further said, “The commitment to adhere to a fiscal deficit target of 3.2 per cent is laudable, especially when we are heading for crucial elections in five states.”
Many analysts feel that after the budget presentation, the focus will now shift to global factors and the remaining quarterly results. Meanwhile, the rupee strengthened to Rs 67.59 to a dollar from its previous close of Rs 67.86 top the dollar.
“The government has presented a reasonably positive budget, given the constraints, from equity markets perspective. No changes in capital gains for listed securities and concessions to FPIs will soothe market nerves,” said Rakesh Tarway head of research Reliance Securities.
The announcement on tax exemption to FPIs have also boosted the sentiments. “FM’s fourth Budget, has put India back on the shopping list of FIIs. FM’s best action is that he has not tinkered with the equity capital gains tax regime. The markets are rejoicing that they can continue to enjoy the fruits of investment,” Dhiraj Relli, managing director & CEO - HDFC Securities said.
“Last year our markets bottomed out on budget day and this time, we witnessed a massive intraday up move post the announcement to add another 1.81 per cent to the recent upward leg of the rally. Now, going back to our previous article, we once again did not get carried away by yesterday’s correction and in fact, interpreted this as a healthy development. During the day, Nifty managed to find strong support in the vicinity of mentioned support zone of 8,560–8,500. Due to this massive broad based rally, the Nifty almost tested our expected level of 8737,” said Sameet Chavan, chief analyst, technical & derivatives, Angel Broking.
Shashank Khade, director and co-founder, Entrust Family Office Investment Advisors, said, “The Centre’s focus on revitalising rural economy shall stimulate domestic consumption. The markets are actually cheering the path of fiscal prudence followed by the government.”