Markets ended Budget Day on a high note with benchmark indices closing over 1 per cent higher after FM Nirmala Sitharaman presented the annual Union Budget 2022 on Tuesday, February 1. 

Market opened on a positive note ahead of the Budget and gained further during the day. Market turned volatile soon after the budget. However, indices closed higher led by metals, pharma, FMCG and private bank stocks while PSU Bank, auto and oil & gas stocks dragged. Market senitments were boosted by the long-term “growth oriented” budget.

The BSE Sensex closed at 58,862.57, up 848.40 points or 1.46 per cent. It recorded an intraday high of 59,032.20 and a low of 57,737.66. The Nifty 50 closed at 17,576.85, up 237.00 points or 1.37 per cent.It recorded an intraday high of 17,622.40 and a low of 17,244.55.

Breadth remains positive

The market breadth remained positive with 1,756 stocks advancing on the BSE as against 1,591 that declined while 102 remained unchanged. However, 336 stocks hit the lower circuit as compared to the 321 stocks that were locked in the upper circuit. Besides, 169 stocks touched a 52-week high level and 19 touched a 52-week low.

Union Budget 2022 

The focus areas of the Union Budget 2022-23 included PM Gati Shakti, Inclusive Development and Energy Transition. There are eight engines of PM Gati Shakti, a key infra development initiative of the Modi-led government, the Finance Minister had said. The PM Gati Shakti National Master Plan will also include infra development by States. The Budget also focused on transparency of financial statements and fiscal position, and this reflects the government’s intent.

The focus of the market, besides sector specific announcements were GDP growth numbers, fiscal deficit target and disinvestment plans as well as relief announcements on the taxation front .

As for key numbers, the revised fiscal deficit for FY22 stood at 6.9 per cent (against 6.8 per cent). Estimated fiscal deficit stood at 6.4 per cent of GDP for FY23. The Centre’s budgetary capital expenditure increased from ₹5.5 lakh crore in FY22 to ₹7.5 lakh crore for FY. The FM also mentioned that the gross GST collections for the month of January 2022 are ₹1,40,986 crore, which is the highest since the inception of the GST.

Reactions to Budget

 Ashishkumar Chauhan, MD & CEO, BSE, said, “The Budget of 2022 is a very balanced and continues the incremental growth-oriented approach. The finance minister provided a springboard for an investment cycle with the highest ever share of capex, focus on development of national manufacturing capabilities and clean energy, tax rationalization with no new taxes while maintaining its continuous growth focus on “Aatmanirbhar Bharat”.”

“The Budget boosts spending towards policies that are growth oriented, create jobs, boost manufacturing, helping agri-economy and infrastructure creation. In short, a mix of short-term boost and long-term structural emphasis has been the hallmark of this Budget,” said Chauhan.

According to Vijay Chandok, MD & CEO, ICICI Securities, “The Union Budget 2022-23 has a vision to transform India in the medium term. The budget has adopted new economic growth template for “Amrit Kaal” (run up to India@100) by promoting capital expenditure led economic growth.”

According to Chandok, the capital expenditure outlay along with expanding the scope of private capex through PLI for new age segments is “expected to deliver inclusive growth, job creation and welfare for all.”

“The Budget also seem to be presented in the backdrop of likely pandemic aftereffect which is reflective in the relatively conservative estimation of growth (merely ~11 per cent nominal GDP in FY23) and receipts. Thus, there is a likelihood of lower than projected fiscal deficit. With growth oriented focus intact in the Budget, we expect economic and capital market buoyancy to remain,” said Chandok.

The volatility index softened 8.99 per cent to 19.98.

Devang Mehta, Head – Equity Advisory, Centrum Wealth said, “The equity markets were cheerful on the announcement of huge outlay of capital expenditure in overall infrastructure development. This Union budget will also lay the foundation for economic growth through public investments as India emerges from a pandemic induced slump.”

“Measures announced for manufacturing, infra building including roads, highways, railways, renewable energy, MSMEs, farm sectors etc, if executed with diligence will go a long way in attracting private capex & lead to accelerated economic growth and of course robust earnings growth for India Inc. Also the fiscal outcome is more or less in line with street expectations & government has refrained from going on the path of sharp consolidation and opted for growth,” said Mehta.

“Hardly any tinkering with tax & avoiding populist measures was also received well by the market participants. Some sectors which get a boost seem to be banking & financial services as a proxy for credit growth & capex, real estate proxy plays like building materials including cement, capital goods, automation, digital focused IT companies, technology, consumption,” Mehta added. 

According to B Gopkumar, MD & CEO, Axis Securities, “Capital Markets love a budget big on spending, and the budget 2022-23 has delivered on this front. We see an increase in expenditure on housing to the tune of ₹48,000 crore, which will boost affordable housing. No major tinkering of taxation is also good for the markets. The markets will welcome this budget as this helps the GDP growth rate, which will remain high. Overall, a simple, futuristic, growth-oriented budget from the government.”

“We believe infrastructure will perform well, clearly because of the great impetus. Cement and Metals should also start picking up. Banking should see improvement in the forthcoming quarters, with GDP growth aiding credit growth,” according to Gopkumar.

Metals shine

On the sectoral front, Metals recorded the highest gains. Pharma, FMCG, realty, IT and financials, barring PSU Bank also gained. Auto and Oil & Gas dragged. 

Nifty Metal was up 4.5 per cent. Nifty Pharma and Nifty healthcare Index closed over 2 per cent higher each. Nifty Private Bank, Nifty FMCG and Nifty Realty were up nearly 2 per cent each. Nifty It was up 1.57 per cent. Nifty Bank and Nifty Financial Services were up over 1 per cent each. 

Meanwhile, Nifty PSU Bank was down 0.58. Nifty Oil & Gas was down 0.72 per cent while Nifty Auto was down 0.75 per cent. 

According ICICI Direct, “Higher than expected fiscal deficit to keep pressure on Gsec yield thereby impacting treasury profits of PSU banks,” it said in a note. 

Broader indices 

As for broader indices, Nifty Midcap 50 was up 0.92 per cent while Nifty Smallcap 50 was up 0.61 per cent. The S&P BSE Midcap was up 1.08 per cent, while the S&P BSE Smallcap was up 0.92 per cent.