Closing Bell | Market cheers Union Budget 2021; Sensex gains 2,314 pts, Bank Nifty hits record high

Time to catch up with some big announcements from the FM today:

In the automobile sector, the government announced a voluntary vehicle scrapping policy which is positive for OEMs as it will push the demand for cleaner cars.
The FM announced bad banks to address the problem of stressed assets of the banks.
Finance Minister Nirmala Sitharaman announced a National Bank for Financing Development (NaBFID) to help in the process of infrastructure financing in the country.
The Union Budget 2021 has lined up Rs 3.05 lakh crore package to revive power distribution companies (discoms) through a revamped reform scheme.
The FM announced a new scheme called the PM Aatmanirbhar Swastha Bharat scheme to strengthen primary and secondary healthcare infrastructure.
The Urban Swachh Bharat scheme will be implemented with an outlay of over Rs 1.4 lakh crore
100 more districts to be added in city gas expansion and independent gas transportation system to be set up
Agriculture credit to farmers of about Rs 16.5 lakh crore for FY22.
FM announced Rs 1,000 crore to solar energy corporation and Rs 1,500 to renewable energy development agency
Gold and silver import duty to be rationalized

Market snapped its six-day losing streak and rose nearly 5 percent as investors cheered Budget proposals made by the Finance Minister. At close, the Sensex was up 2,314.84 points or 5 percent at 48600.61, and the Nifty was up 646.60 points or 4.74 percent at 14281.20.

Anshul Singhal, Managing Director, Welspun One Logistics Parks:

Government’s focus on capital expenditure and infrastructure development will be a shot in the arm for the warehousing and logistics sector in the country. The proposed Development Finance Institution will act as a provider, enabler, and catalyst for infrastructure financing. Also, the budget has earmarked a sharp increase in capital expenditure at Rs 5.54 lakh crore in 2022, from Rs 4.39 lakh crore in 2021.

A planned boost to road infrastructure across the country and seven port projects will aid in job creation and income generation. Overall, the large-scale infrastructure augmentation coupled with asset monetization program of core infrastructure assets will go a long way in realising the national infrastructure pipeline, thereby, benefiting the logistics sector.

Ravindra Rao, VP-Head Commodity Research, Kotak Securities:

Indian government decided to cut the base customs duty on gold and silver from 12.5% to 7.5% and imposed a 2.5% agriculture Infrastructure and development cess. The net implication comes around 10.75% after considering the cess and applicable social welfare surcharge. Since MCX Gold and silver price is inclusive of customs duty, a cut in tax will reduce domestic price. We saw the gold price falling sharply in reaction to the duty cut. However, the impact may not match the change in duty exactly.

India is a major consumer of gold and silver and lower price may improve demand outlook boosting international prices. Going forward, Indian gold and silver prices have become cheaper due to lower taxes however this does not affect the price trend. Since India is largely a price taker, trend in the international market will remain a key price determining factor.

Since we maintain a bullish view on COMEX gold and silver, we expect MCX Gold and silver also to trade with a positive bias. However, the base has shifted lower due to change in applicable taxes.

Abhishek Bansal, Founder Chairman, Abans Group

Reduction in gold and silver import duty - Reducing the import duty on Gold and Silver to 7.5% is a step in the right direction, and industry demands have been addressed in this Budget. However, an Agriculture Infrastructure and Development Cess (AIDC) of 2.5% has been proposed on the imports of specified goods, which includes gold and silver. MCX Gold and Silver prices have reacted to the reduction in import duty. Gold and Silver consumers will certainly benefit from this announcement, as the prices of precious metals have risen significantly from July 2019, when the import duty was raised to 12.5%.

Marzban Irani, Chief Investment Officer – Fixed Income

Expected borrowing for F.Y. 22 at 12 lakh crore is higher than market expectations. Also this year additional Rs 80,000 crore will be borrowed probably in March. Overall budget negative for debt. 10 year yield up by 15 bps at 6.05.

On the positive side institutional framework that will buy investment grade corporate bonds is positive for below AAA rated bonds. Market will await next announcement from MPC on Friday, 5th Feb 21.

Sameet Chavan, Chief Analyst-Technical and Derivatives - Angel Broking:

BANKNIFTY has been bucking the trend since last couple of sessions, while the broader market was correcting brutally. This outperformance has now turned into a leadership and hence, staying beyond 33,000, unfolds fresh leg of the rally for the banking index. Above this, next levels to watch would be 34,500-35,000.

Ashis Biswas, Head of Research at CapitalVia Global Research:

The market witnessed positivity since the beginning of the session. Following the budget, market has seen a decisive positive movement. Market closing above 14,200 will be decisive. 14,170-14,200 will be an important support zone, while 14,600 will be the next resistance the market will remain positive in the near future.

Krish Raveshia, CEO at Azlo Realty:

The real estate industry was expecting growth measures from the Union Budget. Given the current situation, the Finance Minister has presented a balanced budget. The budget was primarily focused on the infra and healthcare sector. Steps like a 1-year tax holiday for affordable housing projects and a 1-year extension for an additional deduction of interest up to Rs 1.5 lakh on loan for affordable housing will benefit all stakeholders of the industry and boost investments. Relief on TDS for dividend on REITs and InvITs will boost investment in these instruments.

A development finance institution for the infrastructure sector will facilitate funding, the good part is that it will be professionally managed to ensure seamless execution of operations.

The Union government has done its part to help economic growth, it is over to RBI to keep rates low, liquidity at ease to ensure a quick revival of the economy.

Market Close:

Benchmark indices broke the six day losing streak and give complete thumbs up to the measures announces in the Union Budget 2021 by the Finance Minister to speed up growth.

At close, the Sensex was up 2,314.84 points or 5% at 48600.61, and the Nifty was up 646.60 points or 4.74% at 14281.20. About 1902 shares have advanced, 979 shares declined, and 198 shares are unchanged.

IndusInd Bank, ICICI Bank, Bajaj Finserv, SBI and L&T were among major gainers on the Nifty, while losers were UPL, Dr Reddy’s Labs, Cipla, Tech Mahindra and HUL.

Except pharma, other sectoral indices ended with a gain of 1-8 percent. BSE Midcap and Smallcap rose 2-3 percent.

Sampath Reddy, Chief Investment Officer, Bajaj Allianz Life

The equity markets have cheered the budget with it being growth oriented, and no major tax changes or levy (expect the introduction of agri & infra cess). However, the bond markets have seen some hardening in yields due to the higher than expected fiscal slippage and government borrowing. The market will soon digest the budget and move on to fundamental factors and global cues. Corporate earnings in Q3 FY21 have been above expectations and is expected to see robust growth of around 30% (for the Nifty index) in FY22. Even though market valuations are elevated, the recovery in corporate earnings and the easy liquidity scenario globally may help to support valuations for some time. Overall, FY22 will be the year of normalization (from the Covid-19 pandemic) and will stage for acceleration in future growth.

NCC bags orders worth Rs 1,200 crore:

NCC has received five new orders totaling to Rs 1,200 crore (exclusive of GST) in the month of January, 202L. Out of these, orders worth Rs 607 crore pertain to Water & Environment Division and order worth Rs 593 crore pertain to Buildings Division. These orders are received from Central/State Government agencies and do not include any internal orders

Dhiraj Relli, MD & CEO, HDFC securities: 

The FM has delivered a unique Budget, wherein all the right measures have been proposed to speed up growth. The move of rationalization of spends, minimal changes to the direct and indirect taxes and no additional taxes will be well received. Higher spending will kickstart a virtuous cycle of growth. The expansion in spending will be funded by higher borrowings which has the potential to create an upward pressure on inflation and interest rates a few months down the line. We believe that the RBI will be in sync with the Govt and both will take necessary action to prevent this happening.

Eicher Motors January sales number:

Gainers and Losers on the BSE Sesnex:

Rupee erases gains

Indian rupeeerased early gains and trading lower at 73.06 per dollar, amid huge buying seen in the domestic equity market post Union Budget 2021.It opened 8 paise higher at 72.87 per dollar against Friday's close of 72.95.

Amar Ambani, Senior President & Institutional Research Head at Yes Securities:

The Budget rightly decided to focus on economic growth by raising expenditure and allowing for a wider fiscal deficit in these pandemic times. Importantly, spend on capital expenditure is far higher at 2.5% of GDP vis-à-vis 1.7% last year, a move in the right direction. Domestic manufacturing is going to be a big growth engine with previous corporate tax reductions, correction of inverted duty structures and a lot more subsidy to come on the PLI front.

Besides the widely expected allocation increases to housing, infrastructure, health and textiles, the move to curb prolonged tax scrutiny and firm mindset shown to privatise certain PSUs, creation of ARCs for bad loans and monetise government land banks are steps in the right direction.

What appealed most to the stock market was the absence of moves like wealth tax or increase in LTCG on equity investments. Unless there are any devils in the fine print, the Budget has been kept simple and played the right cards.

However, bond yields are bound to harden given the extended borrowing programme of the government and inflationary expansion in the budget.

Ashishkumar Chauhan, MD & CEO, BSE:

Overall, the Budget is big on large picture and vision despite the calamitous period we have witnessed last financial year . I would give it 9.5/10.The markets were buoyant reacting to the Budget proposals as no new taxes and levies have been imposed. The rationalization of tax structures for FPIs, NRIs, InvITS and REITs will also help attract more funds for capital formation in India.

A consolidated Securities Market Act, Domestic Gold Exchange regulator, LIC IPO, other PSU disinvestments by showing a clear cut forward path has given tremendous boost and strengthened the markets infrastructure framework for capital formation. Tax efficient zero coupon bonds for infra financing will bring in significant flows and enhance the role of the capital markets in nation building.

Nikhil Kamath, Co-Founder and CIO, True Beacon and Zerodha:

The budget largely turned out to be a non-event, the cardinal issue here seems to be that barely 3 percent of the country is paying tax. To drive any kind of stimulus the government will have to shore up this number significantly.

From the market’s perspective, no reduction in STT or an increase in LTCG largely indicates no change, it is net neutral to the markets. International markets happen to be rallying today and markets are taking cues from this, for now, foreign flows that are largely driving this upmove will continue to be an important metric to track going forward.

TVS Motor January auto sales:

Total sales was up 31 percent at 3.07 lakh units against 2.34 lakh units (YoY). Exports was up 43 percent at 1.01 lakh units against 70,784 units (YoY). 2-wheeler sales grew 34 percent at 2.95 lakh units against 2.20 lakh units (YoY). 3-wheeler sales were down 13.3 percent at 12,553 units against 14,481 units (YoY).

Devang Mehta, Head Equity Advisory, Centrum Broking:

This is surely an expansionary Budget with a vision to spur capex, infrastructure and healthcare spending. The way forward for divestments, privatization and asset monetization looks promising. Going with a sharp correction into the Budget, the street was enthused by the absence of negatives and an attempt to be focused on robust growth for key sectors & in turn boost economic growth. The market cheer was also led by an underlying pessimism on raising tax rates or taxing the super rich, which was prevailing in the market in the last couple of weeks, which did not materialize and was a pleasant surprise.

Kansai Nerolac Q3:

Net profit jumped 74.2 percent at Rs 204 crore against Rs 117 crore (YoY). Revenue was up 19.6 percent at Rs 1,592.5 crore against Rs 1,331.9 crore (YoY). EBITDA was up 53.9 percent at Rs 304.3 crore against Rs 197.7 crore (YoY). EBITDA margin stood at 19.1 percent against 14.8 percent (YoY).

Eicher Motors January auto sales:

Total sales was 2.3 percent at 5,673 units against 5,544 units (YoY). Total exports gained 7.4 percent at 555 units against 517 units (YoY). Total domestic sales was up 1.9 percent at 4,964 units against 4,871 units (YoY).

Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel Broking:

Market has given complete thumbs up to this mega event has recovered fair bit of ground. Banking has been the major charioteer in this move. For Nifty 14,200 is the level to watch on a closing basis. If manages to surpass, we may see it heading higher. However, a close below 14,000 will not bode well for the bulls.

Nitesh Mehta Partner -  Transaction Tax, BDO India:

The FM’s clarification on tax withholding on dividend payment to FPIs to be done after considering the tax treaty benefits is a welcome move as the current law is silent on this aspect.

Anil Kumar Bhansali - Head, Treasury, Finrex Treasury Advisors:

The Budget has brought cheer to the common man with no covid cess, no change in income tax slab and big expenditure increase by the Governement. The Budget has increased fiscal deficit to 6.8% for 2021-22 and a gross borrowing of Rs 12 lakh crore which has pushed yields in bond market higher and rupee lower to 73.13. The rupee has since recovered to 73.05 as stock markets have moved higher.

Time for a roundup of the big announcements:

Announced 'Aatmanirbhar' package in May 2020 to sustain recovery
Total COVID support measures by govt & RBI amount to Rs 27.1 lakh crore
Will implement jal jeevan mission with outlay of Rs 2.87 lakh crore
Announce Voluntary Vehicle Scrapping policy
Mega investment textile park scheme to be launched
National monetisation pipeline to fund new infra projects
FY22 capex target at Rs 5.54 lakh crore versus FY21's Rs 4.39 lakh crore
FY22 fiscal deficit pegged at 6.8% of GDP and FY21 fiscal deficit pegged at 9.5% of GDP
To launch a securities market code
FDI in insurance increased to 74%
FY22 divestment target at Rs 1.75 lakh crore
Will spend Rs 50,000 crore on national research foundation over 5 years
Deduction on payment of interest for affordable housing extended by 1 year
Will take steps to smoothen GST further

SML Isuzu Jan auto sales

Total sales down 51.9% at 535 units versus 1,112 units (YoY).

BSE Realty index gained 3 percent after deduction on payment of interest for affordable housing extended by 1 yr:

Sanitary ware stocks in focus:

Finance Minister Nirmala Sitharaman, during her Union Budget 2021 speech, announced an allocation of Rs 1,41,678 crore for Urban Swachh Bharat Mission 2.0.

The announcement in the Budget was made as part of the government's plan to strengthen preventive health infrastructure. The allocated amount is an outlay for the next five years, beginning from the financial year 2021-22.

Nifty Auto index added 3% post vehicle scrapping policy:

"This is an excellent budget and very very good for India. Fiscal deficit to GDP is high but government needs to spend more on infrastructure (roads, bridges, electrification), healthcare," Mark Mobius of Mobius Capital Partners LLP told CNBC-TV18.

"I think once this money gets into economy, it will be very good for India. This year is good for stock market performance," he said.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services:

This is indeed a bold growth-oriented budget. Absence of the much-feared Covid tax and the surcharges on Income Tax is a great relief. Privatization of 2 nationalised banks and proposal of monetization of assets like land are clear positives. Raising FDI in insurance from 49% to 74% is welcome. Market response to the budget reflects growth optimism. In brief, the FM has presented a pragmatic, bold and visionary budget in these difficult times.

Aatur Thakkar- Co-Founder and Director at Alliance Insurance Brokers:

Increased FDI in the insurance sector will help expand insurance penetration. This was required as insurance businesses require huge capital and deep pockets; and with the increase in FDI limits, additional infusion of capital will enable growth and help insurance reach to the last mile at the grass root level. This one move will help create more jobs for youth which is the need of the hour.

We also appreciate the Government’s move to keep control in the hands of Indian residents by announcing that the directors have to be of the Indian origin.
Divestment of Government’s share in the one PSU insurance company and announcement of Asset Reconstruction Company and Asset Management Company will help banks tackle bad loans and is a great step for a healthy financial system within the county.

The FM has made a bold attempt by creating a Hexa pillar Budget to boost India Inc. in the pandemic hit economy. Targeted measures in the healthcare space should act as necessary inoculation for India's young workforce. Investment in the infrastructure sector, reducing regulatory forbearance, consolidation of regulations, implementing digitisation in several sectors should act as catalysts in improving India's rank in Ease of Doing Business, said Harry Parikh, Associate Partner - Transaction Tax, BDO India.

Market Updates

Benchmark indices are trading strong with 3 percent gain after Finance Minister Nirmala Sitharaman has presented the Union Budget 2021-22 in the Parliament today.

At 13:03 hrs IST, the Sensex is up 1,647.96 points or 3.56% at 47933.73, and the Nifty up 459.30 points or 3.37% at 14093.90. About 1642 shares have advanced, 950 shares declined, and 143 shares are unchanged.

Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research: 

We had expected higher allocation for the health sector given the vulnerabilities in the health infrastructure exposed by the pandemic. India's public spending on healthcare needs to be stepped up from the current 1% of GDP to around 3% of GDP.

The plan to set up 17,000 rural and 11,000 urban health centres along with public health labs is a step in the right direction and will also generate significant employment in the health sector.

Nifty Bank Index jumped 6 percent supported by the IndusInd Bank, ICICI Bank and SBI:

Suraj Malik, Partner - Transaction Tax, BDO India

The Budget has rightfully recognised the new age gig economy including platform workers and made provision for benefits including insurance, minimum wages and health benefits. This should be coupled with a simplified compliance regime for aggregators and employers to make the delivery of benefits effective.

Real estate, housing finance companies in focus:

FM announced deduction on payment of interest for affordable housing extended by 1 year and there has been a tax exemption for notified affordable housing for migrant workers.

Real estate including affordable housing, and housing finance companies will be in focus.

Stocks in focus: Oberoi Realty, DLF, Godrej Props, Brigade Enterprises, Can Fin Homes, HDFC, LIC Housing Finance, Aavas Financiers​

Sugandha Sachdeva, VP - Metals, Research & Energy, Religare Broking:

In its continuing focus on AtmaNirbhar Bharat, Finance Minister Nirmala Sitharaman announced the establishment of seven textile parks across the country.

Impact: The move is expected to be a boost for the local textile industry, and in near term will support consumption of cotton and its products, and is therefore positive for the cotton complex basket.

Lav Chaturvedi, ED & CEO, Reliance Securities: 

The single securities market code announced in the Budget speech will bring out the ease of doing business in Indian Financial Markets. This along with the FDI regime and development financial institution would be transforming for financial markets.

Time for a roundup of the big announcements so far:

FY21 Fiscal Deficit pegged at 9.5% of GDP, FY22 forecast at 6.8%
Gross market borrowing target at Rs 12 lakh crore for FY22
Ship recycling capacity to be doubled by 2024
Introduction of Aatmanirbhar Health Yojana with outlay of Rs 64,180 crore over 6 years
Voluntary vehicle scrappage policy: Vehicle to undergo fitness test - Passenger vehicle – 20 years and commercial vehicles – 15 years

Simplified regime for one-person company will encourage start-ups and entrepreneurs to do business under a corporate structure in an organised and structured manner that can help them to scale and grow, said Suraj Malik, Partner - Transaction Tax, BDO India.

FM raises FDI limit for insurance:

Insurance stocks rallied 3-6 percent after Finance Minister Nirmala Sitharaman, in her Union Budget 2021 speech, increased the foreign direct investment limit for the insurance sector to 74 percent.

In a proposal to amend the Insurance Act 1938, the government increased foreign direct investment limit for the insurance sector to 74 percent from 49 percent earlier. Click to read more

Indraprastha Gas, Mahanagar Gas, GAIL​ in focus:

FM Nirmala Sitharaman announced that city gas distribution network to be expanded to 100 more districts which is positive for the city gas distribution firms.

Arka Mookerjee, Partner, J, Sagar Associates

The consolidation of securities laws, existing decriminalisation of offences under the Companies Act and the proposed decriminalisation under the LLP Act marks an important move towards making Indian corporate legal framework, simpler, business friendly and ultimately (hopefully) reducing compliance costs.

The securities market code is in line with previous discussions on the NFRA. It marks a step towards streamlining the multiple laws, ordinances, guidelines and regulations. If drafted and executed in a proper manner, it will be helpful to market participants and remove any possible conflicts in the regulatory framework and will provide clarity in policy making to investors and stakeholders.

Let’s give you a catch-up of the latest on the FM’s announcements in budget: 

FY22 Fiscal Deficit pegged at 6.8% of GDP
Net borrowing for states capped at 4%
Fiscal Deficit will reach below 4.5% by FY26 and hope to get to back to fiscal consolidation path by FY26
Will approach market for additional Rs 80,000 crore to fund FY21 Fiscal Deficit
Gross market borrowing target at Rs 12 lakh crore for FY22

Religare Broking:

Paid Rs 75,100 crore for wheat MSP and 43.46 lakh farmers benefited.For Paddy – in 2020-21 estimate of Rs 1,72,752 crore is to be paid versus Rs 2019-20 Rs 41,931 crore and currently 1.54 crore farmers benefitted.The agriculture credit to farmers ~ Rs 16.5 lakh crore for FY22

It is beneficial for agriculture and allied sectors. Companies like Coromandal, Godrej Agrovet, UPL, M&M, Escorts