Sensex Finishes Strong Cheering Budget Proposals

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Share markets in India rose after finance minister Arun Jaitley unveiled a budget with a range of incentives for companies and geared towards boosting infrastructure and developing the rural economy.

At the closing bell, the BSE Sensex stood higher by 486 points, while the NSE Nifty finished up by 155 points. The S&P BSE Mid Cap & the S&P BSE Small Cap finished up by 1.7% respectively. Realty stocks gained the most, followed by auto, FMCG and bank stocks.

In a relief to taxpayers who are bearing the brunt of demonetisation, Finance Minister Arun Jaitley announced a reduction in the tax rate for individuals having income in the Rs 2.5 lakh-Rs 5 lakh bracket to 5% from the current 10%. This will lead to a 50% saving in the income tax if a person is earning up to Rs 5 lakh.

The government also kept the securities transaction tax (STT) and other taxes for the capital markets unchanged.

Asian markets finished mixed as of the most recent closing prices. The Nikkei 225 gained 0.56%, while the Hang Seng lost 0.18%. European markets are broadly higher today with shares in France leading the region. The CAC 40 is up 1.03% while London's FTSE 100 is up 0.95% and Germany's DAX is up 0.95%.

Extending gains for the sixth straight session, the Rs strengthened by another 24 paise to 67.63 against the US$. Oil prices were trading at US$ 52.93 at the time of writing.

Shares of state-run banks such as SBI, Union Bank of India, Bank of Baroda, Punjab National Bank and Syndicate bank hogged the limelight and climbed by up to 4% as the government announced infusion of Rs 100 billion in public sector banks in the next fiscal.

The Finance Minister also proposed to double the lending target of Pradhan Mantri Mudra Yojana (PMMY) and set it up at Rs 2.44 lakh crore for 2017-18. The government's plan to recapitalise banks continues, despite the deluge of deposits in public sector banks (PSBs) following demonetisation.

Realty index surged 5% in today's trade after Finance Minister Arun Jaitley granted infrastructure status to affordable housing, a long-time demand from the industry. The new measure will reduce costs for developers and attract investors.

Sentiments also remained upbeat in the housing companies as holding period for capital gains on sale of immovable property (land and building) to qualify as long term capital gains is proposed to be reduced to 2 years from 3 years.

The base year for calculation of such capital gains with indexation benefit is also proposed to be shifted from 1981 to 2001. These steps are expected to reduce the capital gains tax burden on property sellers and thereby make movement of immovable capital easier.

Arun Jaitley announced the abolition of FIPB, a body that clears proposals envisaging foreign investment up to Rs 50 billion. The minister also announced that further liberalisation of the FDI policy is under consideration. Over 90% of the foreign direct investment (FDI) is coming through automatic route. FDI into the country increased by 30% to US$ 21.62 billion during April-September this fiscal.

The government also proposed to create an integrated public sector 'oil major' which will be able to match the performance of international and domestic private sector oil and gas companies. Oil & Gas stocks finished strong with HPCL and Petronet LNG leading the gains.

The government has pegged the fiscal deficit target at 3.2% of GDP for 2017-18. A fiscal deficit range will replace a definite target, which is expected to free the government's hands in meeting its fiscal goals. India's government deficit to GDP ratio is higher than most G-20 countries. Therefore, any attempts of relaxing fiscal consolidation to spur demand must be weighed carefully.

India Runs a High Government Deficit Among G-20 Countries

To ensure transparency in political funding in the country, the government has proposed that any maximum donation from any one source can only be Rs 2,000 from Rs 20,000.

This is something that we have been talking about for a long time. Vivek Kaul, our big picture expert had started a petition to end special privileges to political parties. Over 25,000 of our readers signed up for the petition to get equal rights and bring about an era of transparency in the funding of political parties.

The budget presented by FM was focused on boosting economic growth and hence it was a good budget. The finance minister has been to spend more in rural areas, infrastructure, and poverty alleviation and yet maintain the best standards of fiscal prudence. Finance minister stated the need to continue with economic reforms, promote higher investments and accelerate growth.

Market participants remained optimistic after the budget announcement. However, it remains to be seen how the policies and amendments mentioned in the Union Budget will be implemented over the year.

And here's a note from Profit Hunter:

Today the Nifty-50 index chart is up by 155 points as the market cheers the budget.

After the index peaked in September 2016 at 8,970 levels, it corrected over 11% to make a low of Rs 7,908 in December 2016.

Since then, the index is rallying strongly in an uptrend channel line. In the process, it overhauled two major resistances provided from 8,250-8,300 levels and 8,550-8,600 levels. On Friday, the index resisted from the channel's upper line after making a high of 8,672.

The index started the week on a negative note. It corrected to re-test the 8,600 levels (previous resistance turned support). Today, while the budget speech was on, the Nifty index traded in a very tight range. Right after, it shot straight up rallying sharply to gain 1.81%, clearly looking very happy about the budget announcement.

Currently, the index momentum is highly positive. But it is again trading at the channel's resistance line. Whether the momentum wins, or the resistance, will remain to be seen in coming sessions.

Indian Markets Cheers Budget

 

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