As Finance Minister Nirmala Sitharaman announced a Budget that is being seen as growth-oriented and balanced, Dalal Street gave a thumbs up. The Sensex rallied 2,300 points, or 5 percent, to 48,600.61 and Nifty gained 646.60 points, or 4.74 percent, at 14,281.20 in today's session.
This has been the best performance by the stock market on a Budget Day since 1999.
“Equity market was most thrilled with the absence of some nightmares like the introduction of wealth tax or raising LTCG tax, especially given that this was a challenging year on the revenue front for the government. The FM’s apt deviation from the path of fiscal consolidation to support growth has been well-taken," said Amar Ambani, Senior President and Head of Research – Institutional Equities, Yes Securities.
What the market also cheered is the massive front-loading of expenditure for the rest of 2020-21, which will have a positive ripple effect on the economy.
Amar Ambani added that the stock market can come to terms with a slightly higher cost of capital, which will be offset by faster growth momentum and continued foreign portfolio flows. "The government also looks firm in its intent to form an ARC for bad loans, support domestic manufacturing through PLI schemes and custom duty corrections and privatise certain PSUs and monetise its land assets - all of which are pro-efficiency signals."
Last time the market rose as much as today on any Budget Day was in 1999 when the BSE Sensex jumped 5.13 percent. On the Budget Day in 1997, the index had jumped 6.5 percent.
Chart: Below is the performance of Sensex on Budget Days in last 10 years
The Union Budget 2021 focussed on healthcare and infra sectors.
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"Markets witnessed fireworks all-around as the government set the roadmap for the economic recovery in the Union Budget by focusing on growth. After the initial downtick, the benchmark traded buoyant for most of the session and gained noticeable momentum after the budget speech got over. The FM in her budget speech prioritize growth and allocated funds for sectors such as infrastructure and healthcare," said Ajit Mishra, VP - Research, Religare Broking.
Gains were mainly led by banking, infra, metal and auto stocks. Bank Nifty touched a record high with a gain of 8 percent closing at 33,305.30 on FM measures to clean up the NPAs in the sector.