Finance minister Nirmala Sitharaman said at the post-Budget press conference on Saturday that she would wait for Monday for a proper reaction from the stock markets on her second Union Budget.

On Budget day, the markets did pretty bad. The 30-stock S&P BSE Sensex closed the day at 39,735.53 points, 987.96 points lower than the previous day’s close (in intraday, it lost as much as 1,092.25 points).

But Sitharaman, calling the Budget ‘very forward-looking’, said she would wait for a full working day to see how the markets would react. “I think much of what we have said in the Budget would definitely have a positive impact on the stock market,” she said.

On Monday, it was more like investors had come to terms with the absence of short-term booster shots for the economy, which is in a slump. The day was marked by volatility. At 39,872.31, the Sensex closed 136.78 higher on Monday (day’s high: 40,014.90; day’s low: 39,563.07) than Saturday’s close. The MidCap index did slightly better, closing 169.27 higher (226.81 up and 67.39 down in intraday); the SmallCap index added just 15.3 (69.9 up and 112.841 low in intraday).

Ajit Mishra, vice president–research, at Religare Broking remarked the markets would continue to witness volatility due to the absence of major announcements in the Budget. “The Indian markets witnessed a volatile session but ended on a positive note as the investors absorbed the Union Budget disappointment.” In the global context, Mishra opined that while a liquidity boost of $173 billion by the Chinese central bank is a good sign, rising concerns over coronavirus may continue to cause uncertainty in the markets.

According to Vinod Nair, head of research at Geojit Financial Services, the market is finding some sanity after the setback of not meeting high expectations from the Budget. “Hereon, the focus will be on corporate results and global trend,” said Nair. In Nair’s view, with valuations on the higher side, the on-going results reported have been mostly in line with estimates. “Manufacturing PMI shows notable rebound providing a breather that the economy will stabilise as mentioned in the Budget," Nair added.

Separately, in a detailed note around the latest Union Budget, Morgan Stanley’s equity strategists Ridham Desai and Sheela Rathi wrote that their major takeaway from the Budget is the government continues to focus on improving the investment cycle as its strategy to revive economic growth. Given the limited resources at the government’s disposal, choosing to push investments over consumption struck Desai and Rathi as a more viable strategy.

“Overall, the Budget continues to focus on providing impetus to the investment cycle to boost growth rather than provide stimulus to consumption,” the Morgan Stanley duo noted. “This should be benign for inflation but also rules out a case for a V-shape recovery in growth,” they added. “The Budget may have disappointed the market since it may have been expecting greater rural stimulus, removal of capital gains tax, and a more aggressive privatisation agenda.”

The Budget proposed the removal of dividend distribution tax (DDT), which in Desai and Rathi’s view could further boost corporate saving in addition to the cut in corporate tax rates announced in September 2019. Pegging the boost to corporate saving through the tax rate cut at ₹1.45 lakh crore, the duo estimated that about ₹65,000 crore is being collected as DDT in FY20. “We think most companies will not raise dividends proportionate to the tax reduction and could save the bulk of the tax break,” the duo noted.

Desai and Rathi further noted that a lot of high-dividend-paying companies may not have the growth in earnings to accommodate higher dividends. “The fall in the private investment rate over the past decade has been the main structural factor hurting India’s growth rate,” they added. “The strategy to lift corporate saving, which is a precursor to higher investments, is appropriate in our view.”

While those factors would work over the long term, the bourses’ lacklustre performances on Monday clearly indicate that the markets are disappointed by the longest-ever budget speech from Sitharaman.

Follow us on Facebook, X, YouTube, Instagram and WhatsApp to never miss an update from Fortune India. To buy a copy, visit Amazon.