 "sensex, markets")
The Indian equity benchmarks ended slightly lower on Thursday as the Interim Budget unfolded largely as anticipated, devoid of any major surprises.
The absence of populist measures and the government’s fiscal prudence, according to experts, will likely buoy investor sentiment and attract investments in the long run. But the markets, currently trading at elevated valuations, lacked any immediate trigger in the form of major announcements, they said.
The Sensex closed the session at 71,645, marking a decline of nearly 107 points or 0.15 per cent. Meanwhile, the Nifty50 index fell by 28 points, or 0.18 per cent, to conclude at 21,697. Both benchmark indices traded approximately 0.3 per cent higher ahead of the Budget speech. This marked the first negative close for the market on a budget day since February 1, 2020, and the worst vote-on-account day performance since February 16, 2009.
Despite this being the final Budget before the Lok Sabha elections, the government refrained from unveiling any populist measures. The central government also left direct and indirect taxes unchanged. It kept its fiscal deficit target at 5.1 per cent for 2024-25, a move that was well-received by the bond markets as the 10-year bond yield eased to 7.06 per cent from 7.14 per cent at the previous close.
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“In an election year where stakes are high, the government has once again resisted the temptation for populism. Instead, it has demonstrated excellent strategic sense by opting to continue on the path of fiscal consolidation,” said Motilal Oswal, MD & CEO, Motilal Oswal Financial Services.
However, Oswal noted lack of initiatives to boost consumption as a disappointment. “Consumption, particularly in rural India, has been weak, as indicated by corporate earnings for the past few quarters. The Interim Budget does not provide any near-term solution for quick consumption revival,” said Oswal.
Ashish Gupta, CIO of Axis AMC, argued: “While we did not expect any major announcement in this Budget, the lower fiscal deficit, coupled with higher capex outlay, will aid the continued momentum of India’s growth story. Both these moves are enablers for a pickup in the private capex cycle.”
Certain sectors reacted positively to the Budget measures. For instance, seafood sector stocks, such as Waterbase, Apex Frozen Foods, and Avanti Feeds, rose as the government increased the aquaculture productivity target from 3 tonnes to 5 tonnes per hectare, and aimed to double the aqua exports target to Rs 1 trillion next year.
Conversely, most railway stocks declined despite the government announcing three separate rail corridors and plans to enhance the safety and convenience standards of 40,000 rail bogies.
Market sentiment was also influenced by the US Federal Reserve’s indication that it is unlikely to cut rates by March. After holding rates, the Fed stated on Wednesday that it does not deem it appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably towards 2 per cent.
The 19 sectoral indices of the BSE ended a mixed bag, with telecom and realty declining the most, while banking and logistics stocks gained the most. Overall, 1,774 stocks advanced and 2,081 declined on the BSE.
Dhiraj Relli, MD & CEO, HDFC Securities, concluded: “Better than Street expectations of fiscal deficit for FY24 and FY25 and the consequent lower borrowings target in FY25 have enthused the bond markets. Announcements on rail infra spend and an 11.1 per cent rise in overall capex would be in line with most expectations. All in all, we think the impact of the Interim Budget on the equity markets will be neutral to mildly positive for the near term, and other emerging triggers will drive their trajectory later.”
