MUMBAI: Equities soared unexpectedly on the eve of the Interim Budget announcement, with BSE Sensex gaining 665 points or 1.87 per cent to close at 36,256.69 and NSE Nifty 179 points or 1.68 per cent to close at 10,830.95. The view on Dalal Street was unanimous that the rise in indices was more due to the United States Federal Reserve’s overnight decision to pause interest rate hike and the resultant gains in Dow Jones index.

Market expectation from this budget has been muted with hardly any pre-budget rally: one, it is taken as a vote-on-account when no big policy announcements are conventionally pronounced, and two, being an election year, populist measures are expected. Farm relief package is another expectation taken for granted. 

However, the commonly accepted view is that there could be focus on agriculture relief and a little bit of populist announcements, keeping the upcoming elections in mind.

Being the last day of the derivatives rollover and with the budget coming up, traders would have wanted to cover their short positions to play it safe, said Gaurang Shah, Head Investment Strategist, Geojit Finacial Services.

“In this budget, the government should release a road map for the merger between PSU banks. This will cause the formation of four to five big national banks by way of consolidation,” said Deven Choksey, MD, KR Choksey. 

The idea is to get the PSU banks out of the Prompt Corrective Action regime so that loan flows get easier. The other suggestions for the government are to monetise share in non-listed companies and assets to raise funds needed for relief packages.

The recent banking sector results have also infused some positive move in the stocks, and Thursday’s gains were across the board with gains recorded in all sectoral indices. Investors are also looking for any momentum the consumption story might get from the budget announcement.

“Any move on relaxing corporate tax rate, long-term capital gains or DDT (Dividend Distribution Tax) can be positive for whole markets. Any measure like farm package, tax relief or BPL pension will boost demand,” Prabhudas Lilladher had said in its pre-budget analysis.

The general recommendation is to play it safe, picking up stocks slowly and carefully from budget up to the elections.