Indian Indices Turn Volatile; Healthcare, Agriculture Stocks Gain after Budget Announcement

Sat, 1 Feb 12:30 pm

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Share markets in India are presently trading on a volatile note as Finance minister Nirmala Sitharaman presented the Budget for financial year 2020-21.

Sectoral indices are trading mixed with stocks in the FMCG sector and automobile sector witnessing buying interest, while power stocks and metal stocks are witnessing selling pressure.

The BSE Sensex is trading down by 43 points while the NSE Nifty is trading down by 18 points. The BSE Mid Cap index is trading up by 0.1%, while the BSE Small Cap index is trading down by 0.2%.

In news from the macroeconomic space, Finance Minister Nirmala Sitharaman while presenting her second union budget said goods and services tax (GST) rate cuts have led to an annual benefit of Rs 1 trillion to consumers, enabling households to save as much as 4% of their monthly spending.

She said that GST has helped the logistics and transport sector immensely. The turnaround time of trucks got reduced, the dreaded inspector raj vanished.

The minister, who started her speech promising to address aspirations of the youth, said the Budget for FY21 seeks to build an inclusive society that takes care of the weak and the vulnerable.

She said boosting income and enhancing purchasing power of people would need a higher economic growth rate which will ensure that the youth are gainfully employed.

Here are some key takeaways from the Budget 2020-2021:

Central government will provide Rs 993 billion for educational sector in FY21. New education policy will be revealed soon. FM Nirmala Sitharaman said, "by 2030, India will have largest working age population in the world. This population needs both job and life skills."

FM said that simpler GST filing system will be introduced from April 2020. She also revealed that in the last two years, they have added more than 60 lakh new taxpayers.

A new scheme of smart meters will be launched. Here, the prepaid meters will give freedom to give consumers to choose supplier and rate as per their requirement. A total allocation of Rs 220 billion will be given to power and renewable sector.

Government has pegged the agricultural credit target at Rs 15 lakh crore for fiscal 2020-21.

Government will provide 20% equity for Bengaluru Suburban Transportation Project. This will be a Rs 186 billion project. An allocation of Rs 1.7 lakh crore for transport infrastructure will be provided in FY21.

A total of 12 lots of highway bundles will be monetized by 2024.

Indian Railways will set up Kisan Rail in public-private partnership (PPP) mode for cold supply chain to transport perishable goods.

FM proposed allocation of Rs 273 billion for industry and commerce in FY21. She also proposed a total allocation of Rs 123 billion for Swachh Bharat mission for FY20-21.

Yesterday's Economic Survey estimated the Indian economy to grow at 6-6.5% in 2020-21, and urged the government to use its strong mandate to deliver expeditiously on reform measures.

We will be sharing the highlights and our view on the budget here. Stay tuned.

Until then, you can watch the video below where Tanushree shares how you should react to the Union Budget announcement.

Watch Now...

Moving on to news from the commodity space, gold prices edged higher today, reclaiming the 41,000-mark, tracking positive global cues.

April gold futures rose 0.2% to Rs 41,120 per 10 gram, edging closer to record high of Rs 41,293, hit earlier this month.

Tracking gold, silver futures also edged higher by 0.2% to Rs 47,075 per kg.

In global markets, gold prices surged to US$ 1,588 per ounce on Friday as worries about global growth due to fast-spreading coronavirus boosted appetite for safe havens.

The World Health Organization declared the epidemic a global emergency. The US declared a public health emergency in response to the outbreak, ordering citizens returning from the Hubei province at the center of the outbreak be quarantined for as long as 14 days.

Note that earlier this week, it was reported that India's gold demand fell 9% to 690.4 tonnes in 2019 from the previous calendar year as record domestic prices and economic slowdown dented retail purchase.

The World Gold Council (WGC) said that gold demand in India could increase amid hopes of increased acceptance of high price level and likely economic reforms boosting consumer confidence.

In last year's budget, the government had raised import tax on gold to 12.5% from 10% earlier.

Speaking of gold, how lucrative has gold been as a long-term investment in India?

The chart below shows the annual returns on gold over the last 15 years...

Gold Has Been a Shining Long-Term Investment

As you can see, barring just two years - 2013 and 2015, gold has delivered positive returns in 13 of the last 15 years.

Here's what Ankit Shah, the editor of daily premium newsletter Equitymaster Insider (requires subscription) wrote about this in one of the editions of The 5 Minute WrapUp...

• "In fact, gold has delivered double-digit gains in 10 of the last 15 years.
  
  During the entire 15-year period, gold has shot up 555% (compounded annual return of 12.1%).
  
  During the same period, the Sensex surged 511% (compounded annual return of 12.0%). If you include dividends, the Sensex returns would be higher than gold by a couple of percentage points.
  
  One must note that the Sensex returns are not representative of the broader market returns. Moreover, gold was a no-brainer. You didn't have to study financial statements, business models and forecast future earnings growth to get a double-digit return on your investment."

Meanwhile, Vijay Bhambwani talks about how gold has been relied upon by humankind for 3000 years in one of his videos.

If you consider street inflation, your fixed deposits are giving negative yields. In times like these, Vijay considers gold as a safe haven.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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