Markets gave a thumbs-up to the budget. Measures such as the fiscal roadmap and the changes in the personal income tax slabs were sentiment changers on Dalal Street. The Sensex in fact, rallied by more than 400 points immediately after the Budget speech, but came off towards close as the extended weekend and uncertainties in global markets weighed on sentiment. The Sensex finally ended at 16430, higher by 175 points and the Nifty closed at 4922, up 63 points.
This has been the biggest gain on Budget day in the past six instances. The indices had reported a record fall of 6% on the day of the previous budget, i.e. July 6 last year.
The finance minister Pranab Mukherjee laid down a roadmap for bringing down the fiscal deficit from 6.9 per cent in the revised estimates for the current fiscal. He has pegged the FY12 fiscal deficit at 4.8% of GDP and the FY11 fiscal deficit at 5.5%. And the market borrowings for the next fiscal have been pegged at Rs 3,45,000 crore.
The personal tax slabs have been reworked. There will be no income tax on personal income up to Rs 1.60 lakh per annum, while Rs 1.6-5 lakh would attract a tax of 10 percent and income between Rs 5 lakh and Rs 8 lakh would involve a tax of 20 percent. Income in excess of Rs 8 lakh would be taxed at the rate of 30 per cent.
The finance minister set a divestment target of Rs 25,000 crore in FY10. Moreover, he exuded confidence about introducing Goods and Services Tax (GST) and Direct Taxes Code (DTC), albeit with a delay of a year, from April 1 next year. He also promised to improve food security and healthcare, and introduce a Food Security Bill in Parliament soon.
Auto stocks surged as the FM hiked the excise duties on MUVs, SUVs and large cars from 8% to 10%, while leaving the small cars and two-wheelers untouched. Tata Motors appreciated by 6.3% at Rs 711, Bajaj Auto moved up 6% at Rs 1,817, M&M added 5% at Rs 1007 and Maruti added 4.4% to Rs 1,463.
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The renewed trust on infrastructure, with an allocation of Rs 19,894 crore for road transport, rubbed on to metal and realty stocks. Hindalco strengthened by 5.3% at Rs 161, Sesa Goa added 5.4% at Rs 399 and Tata Steel gained 1.1% at Rs 573. And in the infrastructure space, Lanco Infra gained 3% at Rs 45, Gammon India added 2.2% at Rs 218 and Madhucon Projects strengthened by 4.4% at Rs 161.
Measures to reign in the fiscal deficit had a positive impact on the banking sector. SBI (stronger by 3.2% at Rs 1975), ICICI Bank (higher by 2.4% at Rs 871) and HDFC Bank (up 1% at Rs 1,704) were the major gainers in this space.
With the government hiking the excise duties on all non-oil products by 2 per cent to 10 per cent and on petrol and diesel by Rs 1 a litre, as part of stimulus withdrawal, Reliance Industries strengthened by 1.4% at Rs 978 and Cairn India added 3.2% at Rs 266.
And fertilizer companies gained after the Finance Minister proposed to provide government subsidy for fertilizers in the form of cash instead of bonds. Tata Chemicals (up 2.6% to Rs 288) and Nagarjuna Fertilizers & Chemicals (up 0.9% to Rs 32) ended higher.
However, cigarette maker ITC tumbled 6% to Rs 232 as the finance minister raised the duties on smoking and non-smoking tobacco products. And Tata Power Company fell after disappointing consolidated earnings for the third quarter.
The market breadth was strong. out of 2874 stocks traded on the BSE, there were 1848 advancing stocks as against 942 declines.
SBI topped the value charts on the BSE with a total turnover of Rs 210.13 crore. This was followed by DLF (Rs 150.96 crore), RIL (Rs 127.79 crore), ICICI Bank (Rs 125.19 crore) and Tata Motors (Rs 105.16 crore).
Hindalco led the volume charts with trades of 5.20 million. It was followed by DLF (4.99 million), Jaiprakash Associates (3.50 million), ITC (2.88 million) and Tata Steel (1.65 million).