Benchmark equity indices rose on Friday, with investors largely cheering the interim budget, which was high on populist measures like doubling income tax rebates and a new income scheme for farmers, even as Finance Minister Piyush Goyal tried not to deviate much from the fiscal deficit targets.
The BSE Sensex rose 521 points to a day’s peak of 36,778.14. However, after some late profit booking, the Sensex closed 212.74 points or 0.6 per cent higher at 36,469.43 points. The wider NSE Nifty 50 ended 63 points or 0.6 per cent higher at 10,893.65 points.
The expectation is that the tax rebates, farmer income scheme and other measures announced in the budget will give a huge fillip to consumption.
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“The budget provides a massive boost to the primary engine of growth that is domestic consumption through income tax sops for nearly 30 million low-income taxpayers and 120 million marginal farmers. Equity markets would rejoice with the force multiplying boost provided to sectors in domestic consumption like automobiles, consumer staples and durables,” said Ajay Bodke, CEO at Prabhudas Lilladher.
Not surprisingly, stocks of consumer focused companies were among the biggest gainers on the markets. Hero MotoCorp jumped 7.50 per cent, Maruti Suzuki, which also reported a marginal uptick in January wholesales, was up 5 per cent and Bajaj Auto gained close to 2 per cent. Hindustan Unilever and Asian Paints also rose 2-3 per cent.
“The thrust towards income enhancement is positive for the consumption oriented sectors,” said Navneet Munot, executive director at SBI Mutual Fund, who feels the budget will be seen as a positive event given the continued focus on the income enhancing measures.
Real estate stocks also saw huge buying interest on Friday, in the backdrop of a slew of measures that were announced for the sector under stress.
The measures that were announced included extending the period of exemption from levy of tax on notional rent, on unsold inventories, from one year to two years and exemption of income tax on notional rent on a second self-occoupied house.
Oberoi Realty, Indiabulls Real Estate, Sobha, Godrej Properties and DLF, all rose 1-2 per cent on the BSE.
“We believe that the budget will lead to a continued support to consumption across consumer staples and discretionary, broadly maintaining the fiscal health of the economy. It will enable higher farm incomes as well as improve the rural sentiment. Hence, this budget would stimulate stronger economic activity catalysing a higher growth trajectory, without imparting significant inflationary pressures,” said Harshad Patil, chief investment officer at Tata AIA Life Insurance.
Among the major losers, shares of Vedanta plunged near 18 per cent on disappointing third quarter earnings. The country’s largest lender State Bank of India also fell 3 per cent, despite posting biggest quarterly profit in nearly seven years.
