Budget promises lift investors' sentiment; Sensex rises 695 points

Benchmarks rebound 4% in 3 days as Fed hike concerns ease, too

A combination of favourable global cues and hopes of higher capital expenditure allocation leading to strong economic growth helped the benchmark indices end with gains for the third consecutive session. 

The Sensex ended Wednesday’s trade at 59,558, up 695 points or 1.2 per cent. The Nifty50, on the other hand, gained 203 points or 1.1 per cent and ended the session at 17,780. The benchmark indices have soared 4 per cent in three trading sessions after plunging 7 per cent in the previous two weeks.

The rebound comes after Federal Reserve officials signalled a measured approach towards monetary tightening to fight inflation. Better-than-expected earnings by companies in the US and Europe also boosted sentiment.

Investors have been vacillating between worries about monetary tightening and confidence in economic recovery since the beginning of the year. The Budget and improved global cues have given some respite to investors at the moment.

“The Budget overall was a balanced one with no unpleasant surprises. While there were some disappointments in the absence of measures to impr­ove consumption, economic recovery in FY23, coupled with vaccination progress, would continue to drive demand recovery ahead,” said Siddhartha Khemka, head of research -retail, Motilal Oswal Financial Services.

But concerns about inflation and simmering geopolitical tensions continue to bother investors. Investors are keenly following the tensions between the US and Russia over Ukraine. Some reports suggested that Russia has mobilised more than 100,000 troops near the Ukraine border with no diplomatic breakthrough, so far.

“The markets are currently riding high on the back of optimism after the Union Budget. Besides, global recovery and favourable earnings are adding to the positivity. Amid all, one shouldn't forget that the Nifty50 is still in a trading range, and 18,000-18,300 would continue to act as a hurdle. Among the sectors, banking and financials have the potential to outshine others,” said Ajit Mishra, VP-research, Geojit Financial Services.

Given the continuity of policy focus and pronouncements, analysts said the markets would discount the Budget and shift focus to rising interest rate regimes globally and consequent higher bond yields.

“Corporate earnings growth has remained resilient, so far, in the ongoing earnings season. The upcoming RBI policy meet assumes greater significance now concerning the future of liquidity and interest rates,” said Khemka.

The gains in the Sensex were led by banking and financial services companies. HDFC Bank rose 2.2 per cent and contributed the most to index gains, followed by HDFC, which rose 1.8 per cent. In the past four sessions, India’s market capitalisation has risen by nearly Rs 11 trillion.

The market breadth was strong, with 2,272 stocks advancing against a 1,087 decline. Around 406 stocks were locked in the upper circuit. Banking and Finance stocks gained the most, and their indices gained 2.08 and 2 per cent, respectively, on the BSE.