The domestic benchmark indices closed higher on Tuesday as investors cheered Budget announcements, which aim to boost economic growth battered by Covid-19 and rising inflation. The equity markets gave thumbs up to budgetary announcements that proposed a huge outlay of capital expenditure in overall infrastructure development.

Extending its rally for the second straight session, the BSE Sensex opened higher and gained as much as 1,018 points to hit an intraday high of 59,032. However, the index dropped sharply by 1,294 points to hit a low of 57,738 points during the mid-session as investors resorted to profit booking. The benchmark index staged a smart recovery to close 848.4 points, or 1.46%, higher at 58,862 points.

In a similar trend, the NSE Nifty also opened higher ahead of Budget announcements and swung 367 points intraday to hit a high and low of 17,622 and 17,244, respectively. The Nifty50 finally settled at 17,577, up 237 points, or 1.37%.

This was the third-best Budget day gains in the last ten years; the Sensex had surged a record 5% in 2021 and 1.76% in 2017. The historical data suggests that the Indian stock market has received mixed responses on Budget day in the last 10 years, with Sensex closing higher five times, while it dropped on the other five occasions.

In line with the benchmark indices, the broader markets also notched solid gains. The S&P BSE Midcap index and the S&P BSE Smallcap index rallied 1.08% and 0.92%, respectively.

Metal, capital goods sectors shine

On the sectoral front, metal and capital goods sectors gained the most, while oil and gas and auto stocks emerged as worst performers. The metal sector emerged as the best performer as investors cheered the government’s ₹7.5 lakh crore capex plans for the financial year 2022-23.

The BSE Metal index closed 4.92% higher, led by sectoral leaders Tata Steel, Jindal Steel & Power, Vedanta, SAIL, and NMDC, which rallied up to 8%.

On the flip side, BSE oil & gas index was the worst performer with a 0.91% loss. The loss in oil and gas sector was attributed to mixed earnings by state-owned oil marketing companies and continued rise in crude prices which impacted their margins. The top laggards in the oil and gas space were HPCL, BPCL, Indian Oil, ONGC, and Reliance Industries.

Top gainers and losers

The top gainer on the BSE Sensex was steel major Tata Steel, which ended 7.6% higher. The country’s largest steel maker saw a spurt in buying after it bagged a majority stake in Neelachal Ispat Nigam (NINL). The Tata Group company emerged as top bidder for acquiring 93.71% stake in Odisha-based NINL for ₹12,100 crore.

Some of the other top gainers include Sun Pharmaceutical Industries, IndusInd Bank, Larsen & Toubro, and UltraTech Cement, which rose in the range of 4% to 7%.

On the losing side, auto major Mahindra & Mahindra topped the losers’ chart by falling 1.3% on the BSE. The stock dropped despite reporting 20% growth in monthly sales during January 2022. The total sales surged by 19.55% to 46,804 units last month, compared to 39,149 units in the year ago period.

The other top laggards include Power Grid Corporation of India, State Bank of India, Bharti Airtel, and NTPC, which fell up to 1.2%.

Analysts expect Budget to spur economic growth

According to Devang Mehta of Centrum Wealth, 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 and lead to accelerated economic growth and of course robust earnings growth for India Inc.,” says Devang Mehta, head – equity advisory, Centrum Wealth.

Vijay Chandok, MD and CEO, ICICI Securities, said the Budget aims 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. Outlay of capital expenditure of ₹7.5 lakh crore, up approximately 35% YoY (and at 2.9% of GDP) 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,” he added.

As per Ajay Srinivasan, CEO, Aditya Birla Capital, the finance minister has presented a pro-growth and forward-looking Budget. “The Union Budget has complemented macro growth with social welfare, while being accommodative on fiscal consolidation... The capex-heavy Budget has reiterated focus on public investment to modernise infrastructure over the medium term. The overall focus is clearly to nurture growth and support the economic recovery,” says Srinivasan.

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