Feel-good boost: Sensex Budget day gain biggest in last 14 years

Bulls were in control of the stock market in the run up to the Union Budget 2017 presented on Wednesday amid hopes Finance Minister Arun Jaitley will take pragmatic steps to jumpstart economy, which otherwise seemed to have lost some momentum in recent months due to the government's decision to hunt down black money through its demonetisation exercise.

Even as the Sensex lost over 200 points in two sessions before the Budget day, the mood was quite upbeat a week back as the benchmark index had surged nearly 750 points in just four sessions, underscoring optimism amongst the investors.

A few stock market analysts, however, warned investors of a sharp fall on the budget day and hinted that the party on the Dalal Street may not last long on worries the budget may not meet expectations. But what surprised many was a strong rebound in the markets on the D-day.

Reuters

Reuters

After initial hiccups during the course of the budget announcement, bulls quietly stole a march over the bears thereafter, thereby surging 486 points or 1.76 percent to end above the crucial 28,000 mark. Not just that, the rally in the markets aided Sensex to scale a four-month closing high. However, what is important to note is that the spectacular show by the Sensex in percentage terms was one of its best performance in last 14 years.

In percentage terms, the benchmark index last witnessed such a superlative performance on the Budget day way back in 2005-06, when it jumped 2.19 percent and P Chidambaram held the finance portfolio during the UPA government.

If one go by the Sensex performance on the Budget day in last 32 years, the index has fallen 19 times on the budget day since 1991-92. In fact, the Sensex witnessed its worst fall on the budget day in 2009-10, when former finance minister Pranab Mukherjee announced the budget. On that day, the Sensex had crashed a whopping 5.83 percent or 870 points to end at 14,043, as the FM then had raised fiscal deficit estimates at 6.8 percent for FY10, besides increasing MAT rates to 15 percent from 10 percent.

On the other hand, one of the best performance on the budget day came during the budget year of 1992-93, when the Sensex had zoomed 6.60 percent to end at 3,019. This was a time when India led by former finance minister Manmohan Singh opened up the economy for foreign investors through a slew of economic reforms.

Back in 2017, investors gave their thumbs up to Arun Jaitley's budget announcement, as it touched upon important decisions favouring revival of rural economy, more measures to boost housing and cutting tax rate to boost consumtpion.

"Coming to the Real Estate sector, the moves including the reduction in the tenure of long-term capital gain tax from 3 years to 2 years, rationalisation of capital gains JDA agreement, infrastructure status to the affordable housing segment and most importantly the SOPS inter-alia, the increase of the size of the affordable housing unit and enhancing the universe for the 60sqm stipulation in the segment, are all positive steps for the real estate sector and will definitely help in giving the much needed push to the affordable housing segment," said Venkatesh Gopalakrishnan, President - Business Development & Chief Investment Officer – Shapoorji Pallonji Real Estate

A look at the sectoral peformance suggests that the realty index witnessed sharp rally, surging 4.83 percent on the budget day. Amid hopes that increase in outlay for rural projects would spruce up demand revival there, auto stocks came in focuse, helping BSE Auto index gain nearly 3.5 percent.

Similarly, BSE FMCG index rose 2.8 percent, followed by Bankex (up 2.3 percent), BSE Capital Goods (up 2.2 percent) and BSE PSU index (up 1.92 percent), respectively.

The expectation of increased tax collection on account of demonetisation and a bounce back in the economy on the back of pent up consumption demand is expected to spur tax collection in 2017-18, US-based Morningstar report said in a client note.

Consumer-focussed stocks attracted significant buying support on the budget day. ITC rose 4.5 percent helping the m-cap of the company surge by Rs 14,127 crore in a single day to Rs 327,041 crore.

Auto major Maruti Suzuki jumped 4.7 percent, resulting in the company's m-cap rising by Rs 8,348 crore to Rs 186,469 crore.

Similarly, State Bank of India shares rose 4 percent, helping its m-cap gain by Rs 8,213 crore to Rs 215,524 crore.

In fact, total market cap of BSE jumped by a sharp Rs 2.41 lakh crore to Rs 114.97 lakh crore on 1 February. Surprisingly, despite the sharp rise in key benchmark indices, foreign institutional investors seemed less enthusiastic about the overall budget announcement, as they bought local shares worth Rs 74.78 crore. On the other hand, domestic counterparts, domestic institutional investors lapped up domestic stocks at will, leading a cash infusion of Rs 1,133.74 crore in local shares.


Published Date: Feb 03, 2017 03:17 pm | Updated Date: Feb 03, 2017 04:23 pm