Sensex ends marginally in the green after falling on last two Budgets, capex concerns weigh on sentiment

Earlier in the day, however, when the finance minister was presenting the Union Budget, the 30-share Sensex fell to an intra-day low of 77,006.47 -- nearly 500 points lower than Friday's close.

For the first time since 2023, the Sensex managed to end the Budget day in positive territory even though the gains were marginal as finance minister Nirmala Sitharaman unveiled a slew of measures to spur consumption even as concerns over capital expenditure impacted investor sentiments.

The 30-share Sensex provisionally ended the day at 77,505.96, up 5.39 points. However, for the broader Nifty 50, it was the fourth successive year when it ended in the red on the day the Budget is presented. The Nifty 50 provisionally settled the day at 23,482.15, down 26.25 points.

"The Budget announcements are sending a clear message that government will focus on governance, creating capacities, creating conditions conducive for compliance, execution and implementation of policies," said Sandeep Bagla, CEO, TRUST Mutual Funds.

"The onus of demand creation has shifted to the private sector, middle class and the wider populace... Government has not been able to spend in capital expenditure of 11 lakh crore this year, probably because of lack of credible projects and the increase in the outlay for next year to only 11.21 lakh crore is slightly disappointing," he added.

While presenting the Union Budget on Saturday, Finance Minister Nirmala Sitharaman revised the FY25 capital expenditure target from the earlier Rs 11.11 lakh crore to Rs 10.18 lakh crore.

The market clearly was not enthusiastic about a slowdown in capex. Expectations were above Rs 2 lakh crore, but the revised estimate stood at Rs 11.21 lakh crore, a modest 10 percent increase. Additionally, higher-than-expected gross borrowing contributed to market volatility.

Earlier in the day, when the finance minister was presenting the Union Budget, the 30-share Sensex fell to an intra-day low of 77,006.47 -- nearly 500 points lower than Friday's close.

Market participants are of the view that there are concerns that the capital expenditure going ahead might take a hit as government focuses on rationalisation of taxes and leaving more money in the hands of the individual to push consumption -- the exemption limit has been increased to Rs 12 lakh for individual tax payers.

Bagla believes that going ahead, the private sector is unlikely to undertake large capex due to uncertainty over tariff wars and fears of dumping form China. "It puts growth outlook under a cloud in the short run," he says.

Not surprisingly, more than 1800 stocks ended in the red even as gainers at 2084 outnumbered the declines by a slight margin.

Among sectoral indices, Nifty FMCG and Nifty Realty both rallied over 3 each with Nifty Auto, Nifty Consumer Durables and Nifty Private Bank also among those gaining ground on Saturday. On the other hand, Nifty Pharma, Nifty PSU Bank, Nifty Oil & Gas, Nifty Bank, and Nifty IT among others ended the day in the red.

Consumer staple stocks rallied after Sitharaman announced that no income tax will be levied on income of Rs 12 lakh. These measures will boost consumption, as lower taxes will boost household income, which in turn would raise the demand for consumer staple products.

Both four-wheeler and two-wheeler stocks gained rallied on February 1 after the Budget introduced measures to accelerate electric vehicle (EV) adoption and ramp up infrastructure. The finance minister announced a slew of initiatives to build an ecosystem for solar PV Cells & EV Batteries.

Agri stocks jumped up to 9 percent after the Budget unveiled measures aimed at boosting crop diversification, irrigation facilities, and credit availability for farmers. Additionally, Sitharaman announced a mission to achieve self-reliance in pulses in the next six years.

PM Dhan Dhanya Krishi Yojana will cover 100 districts to enhance agri productivity, adopt crop diversification, adopt sustainability, enable post-harvest storage at block level, improve irrigation, facilitate long- and short-term credit and will help 1.7 crore farmers, said the finance minister.

A host of hotel and tourism stocks also rallied up to 5 percent after Sitharaman announced a slew of measures that would give boots to the sector in the coming year. "We will focus on tourism for employment-led growth and Top 50 tourist destinations will be developed in partnership with states," she said during her budget speech. She added that a special emphasis will be given to the destinations of Lord Buddha.

Incidentally, market players heaved a sigh of relief as the government did not tinker again with taxes on capital gains.

"While we await more details , the government's decision to keep capital gains tax and Securities Transaction Tax (STT) unchanged will ensure stability in tax regimes for capital market investors," said Shripal Shah, MD & CEO, Kotak Securities.

"Markets could be disappointed as a higher government capex would have spurred demand faster in a shorter run. Government has lowered the fiscal deficit, which is good for the private sector. The stage is set, the baton has been passed on to the consumer. Now it depends upon the resilience of the Indian middle class and the spirit of the private sector which will dictate the pace of Indian economic growth," said Bagla.

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