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Below is the Daily Market Commentary 01 February 2021 By Mr. Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd

Domestic equities made a strong opening on the day of the Union Budget 2022. As expected market witnessed high volatility, with nifty swinging between gains and losses in a 380 points range. Nifty swiftly recovered from its post-budget fall and closed with gains of 237 points (+1.4%) at 17,577.

Broader market also closed in-line with Nifty midcap 100 up 1.1%, while Nifty smallcap up 0.6%. Among sectors Metals were top gainers up more than 4%, followed by Pharma up 2.3%, IT Realty, FMCG, Media and Financial Services were up more than 1%. While Auto, PSU Bank and oil & gas were laggards. India VIX, volatility index cooled off by ~8% at 20 levels.

The government presented a progressive budget with a vision on ensuring long term economic growth. It continued with its policy of fiscal prudence and pegged FY22 fiscal deficit at 6.9% while setting a target of 6.4% for FY23 which cheered the market.

It was clearly a capex driven budget with the thrust of the Government on sustaining the economic growth through spending across infra ecosystem. Capital spending for FY23 is targeted to increase by 35.4% to Rs7.5 lakh crore with focus on infrastructure development, supply chain, and boosting rural demand.

We expect the market to take the budget positively as it largely remain growth focused and despite several upcoming state elections, the government didn’t resort to populist measures. From a sector perspective, we expect Infra, construction, cement, capital goods, affordable housing, logistics and Defence to be major beneficiaries and remain in focus. 

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