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Indices extend budget day rally

Indian equity benchmarks extended their historic Budget-day rally into second day on Tuesday and ended nearly 2.5 percent higher, as investors continue to cheer Budget announcements amid positive global cues. Markets made a gap-up opening, as traders took encouragement with a private report stating that the increase in healthcare outlay in the latest annual budget will lead India towards a healthier country and the thrust on infrastructure will boost growth and generate jobs. Some support also came in as foreign institutional investors (FIIs) turned net buyers in Indian markets after a five-day hiatus. FIIs net bought shares worth Rs 1,494.23 crore while domestic institutional investors net sold shares worth Rs 90.46 crore.

Key indices extended their gains in late afternoon session, after India Ratings said the Budget numbers are more credible and achievable than in the past many years, and the government may even exceed the revenue targets if the current tax buoyancy level is maintained. Traders were also optimistic, as the US-India Business Council said that the annual budget presented by Finance Minister Nirmala Sitharaman has several bold initiatives that set the tone for an accelerated post-pandemic economic recovery and new opportunities for India’s social development. Traders also took a note of S&P Global Rating’s statement that India's Budget for fiscal 2022 (ending March 31, 2022) represents a comprehensive effort by the Central government to shore up the country's nascent economic recovery. But the brawny spending programme also entails higher-than-expected general government deficits -- at more than 14 per cent of GDP this fiscal year and 11.6 per cent in fiscal 2022.

Asian markets ended mostly in green, as concerns about volatile retail trading receded and investors pinned hopes that declining coronavirus cases and vaccine rollout will support near-term economic recovery. Optimism about talks regarding U.S. stimulus also boosted sentiment. Besides, Statistics Korea said Consumer prices in South Korea were up 0.6 percent year-on-year in January. That beat forecasts for a gain of 0.3 percent and was up from 0.5 percent in the previous month. On a monthly basis, consumer prices jumped 0.8 percent - again exceeding expectations for 0.5 percent and up from 0.2 percent in the previous month. European markets were trading higher, as provisional data from the statistical office Insee revealed French consumer prices climbed 0.6 percent year-on-year in January, after staying flat in December. This was the fastest increase since July, when prices grew 0.8 percent and also bigger than the economists' forecast of 0.4 percent.

Finally, the BSE Sensex rose 1197.11 points or 2.46% to 49,797.72, while the CNX Nifty was up by 366.65 points or 2.57% to 14,647.85.

The BSE Sensex touched high and low of 50,154.48 and 49,193.26, respectively and there were 27 stocks advancing against 3 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 2.26%, while Small cap index was up by 1.59%.

The top gaining sectoral indices on the BSE were Industrials up by 4.23%, Auto up by 3.95%, Capital Goods up by 3.91%, Realty up by 3.70% and Bankex up by 3.42%, while there were no losing sectoral indices on the BSE.

The top gainers on the Sensex were SBI up by 7.10%, Ultratech Cement up by 6.70%, HDFC Bank up by 5.63%, Larsen & Toubro up by 4.82% and Bharti Airtel up by 3.54%. On the flip side, Bajaj Finserv down by 2.34%, Titan Company down by 1.08% and Hindustan Unilever down by 0.77% were the top losers.

Meanwhile, Moody's Investors Service, while silent on the sovereign rating on the higher-than-expected fiscal deficit numbers, has expressed doubts over attaining the higher revenue targets and divestment realisation as assumed in the Budget.

The Union Budget 2021-22 has pegged a fiscal deficit of 9.5 per cent for the current financial year as against the consensus 7 per cent, and 6.8 per cent for 2021-22 with a market borrowing of around Rs 12 lakh crore. It also assumes Rs 1.75 lakh crore to be scooped up from divestment. The Fiscal Responsibility and Budget Management Act will also be amended to achieve a fiscal deficit of 4.5 per cent of GDP by 2025-26 only.

The rating agency said the fiscal deficit target of 6.8 per cent for 2021-22 tries to strike a balance between supporting growth and a modest deficit reduction, but improvements in tax compliance and monetisation targets may be difficult to achieve. Besides, it said the government has limited room to reduce spending without further weakening growth, and nominal GDP growth will remain critical for future deficit reduction.

The CNX Nifty traded in a range of 14,731.70 and 14,469.15 and there were 43 stocks advancing against 7 stocks declining on the index.

The top gainers on Nifty were Tata Motors up by 16.93%, Shree Cement up by 7.29%, Ultratech Cement up by 6.98%, SBI up by 6.66% and UPL up by 5.74%. On the flip side, HDFC Life Insurance down by 2.52%, Bajaj Finserv down by 2.23%, Hero MotoCorp down by 1.50%, Hindustan Unilever down by 1.05% and SBI Life Insurance down by 0.93% were the top losers.

European markets were trading higher;  UK’s FTSE 100 increased 43.45 points or 0.67% to 6,509.87, France’s CAC increased 96.75 points or 1.77% to 5,558.43 and Germany’s DAX increased 168.05 points or 1.23% to 13,790.07.

Asian markets ended mostly higher on Tuesday, supported by optimism around US stimulus packages and global recovery. Besides, declining corona virus cases globally and vaccine rollouts too boosted market sentiments. Chinese shares settled higher on easing liquidity tensions in the interbank money markets, while fall in cases of new corona virus infections too helped to boost up the positive sentiment. Japanese shares gained on hopes for robust domestic as well as US corporate earnings. Japanese government is set to approve a month-long extension of its corona virus state of emergency on February 2, less than six months before the pandemic-postponed Olympic Games open in Tokyo.

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