Budget 2019: St cheers FM largesse with 212-point thump

The Interim Budget 2019-2020 turned out to be in line with investors' expectations as the domestic equity market ended positive reporting modest gains.

Finance Minister Piyush Goyal announced a bouquet of populist measures in the Interim Budget which cheered the market in a poll-bound year.

Unlike last year, when the market nosedived after the Union Budget 2018-2019 announcements, primarily due to the reintroduction of long term capital gains (LTCG) tax, this year both key equity benchmark indices settled in the green zone.

After a high volatile intraday, BSE Sensex closed 212.74 points, or 0.59%, higher at 36469.43, while NSE Nifty ended 62.70 points, or 0.58%, at 10893.65. The 30-share index touched an intraday high and low of 36778.14 and 36221.32 respectively, whereas the broader Nifty touched an intraday high of 10983.45 and a low of 10813.45.

Sectors such as auto, consumer discretionary goods and services, realty, FMCG, information technology gained between 1.11-2.65%. However, stocks such as metals, banks, financials and basic materials eased between 0.06-3.8%.

"Bond yields started to move up and people think that even the revised fiscal deficit target of 3.4% cannot be maintained, hence banking stocks started to react negatively. Additionally, the interest subventions announced by the government will see the banks to take the first hit till the subvention from the government is coming through," said AK Prabhakar, head of research at IDBI Capital. "Going ahead, the market reaction could be muted because this is an election year. If Nifty breaches 10600-level, then it is a thumbs down, while if it crosses 11000-mark, then it is a thumbs-up for the market," Prabhakar further said.

The broader market also had a cheerful day as both the BSE Midcap and Smallcap indices advanced by 0.56% and 0.17% respectively. However, it underperformed BSE Sensex.

HeroMotoCorp, Maruti Suzuki, HCL Technologies, Asian Paints and Bajaj Finance were the biggest contributing stocks on Sensex pack surging as much as 7.48%.

According to Deepak Jasani, head of retail research, HDFC Securities, there are some relaxations for middle-class salaried employees, part of which will lead to higher consumption. This may result in higher sales reported by listed entities. However, he said the fiscal deficit target of 3.4% of GDP for 2019-20 is a slight disappointment as people were expecting a lower fiscal deficit target of 3.1-3.2%.

"After exceeding the fiscal deficit target in FY18, we did it again in FY19. Postponing fiscal discipline every year is not a prudent thing to do though there may be enough justifications year after year. The markets till election will remain volatile as fundamentally there are few positive triggers to look forward to till then," Jasani further added.

Lakshmi Iyer, chief investment officer (debt) and head products, Kotak Mahindra Asset Management Company said the key focus among other things for bond markets was the fiscal math.

"The market is worried about how the revenue side estimates will actually pan out. Uncertainty on how much would be the quantum of OMOs and will they actually be needed will be an uncertain sword hanging in the market," she said.

Meanwhile, as per the provisional data, the foreign institutional investors purchased shares worth Rs 1,315.89 crore on Friday while the domestic institutional investors sold shares worth Rs 5.07 crore on a net basis.