Market Reaction to Budget Proposals
The recent budget proposals have stirred mixed reactions among investors on Dalal Street. During a special trading session held on Saturday, the stock market displayed notable volatility. However, by the end of the session, both the Sensex and Nifty indices showed little change. The Sensex managed a slight gain of five points, closing at 77,506, while the Nifty fell by 150 points, or 0.6%, to settle at 23,482. This muted response reflects the cautious sentiment among investors, despite some sector-specific movements.
Sector Performance: A Mixed Bag
The trading session revealed a stark contrast in sector performance. On one hand, there was a surge in bullish sentiment surrounding stocks from sectors such as real estate, fast-moving consumer goods (FMCG), consumer durables, consumer discretionary, and automobiles. These sectors saw increased interest from investors, indicating a positive outlook. On the other hand, strong selling pressure was evident in sectors like capital goods, power, and utilities, which dampened overall market performance.
Interestingly, foreign funds were aggressive sellers during this session, while domestic funds emerged as net buyers, according to BSE data. This divergence in investor behavior highlights differing perspectives on the budget’s implications. Despite the short-term volatility, many market veterans remain optimistic about equities. They believe that the budget proposals will ultimately have a favorable impact on the economy and the stock market. As Navneet Munot, MD & CEO of HDFC Mutual Fund, noted, the long-term direction rooted in policy prudence should enhance India’s appeal to both foreign and domestic investors.
Economic Implications of Tax Proposals
One of the key highlights of the budget was the income tax proposals, which are expected to increase disposable income for taxpayers. Analysts estimate that these changes could put an additional Rs 50,000 to Rs 1.1 lakh in the hands of each taxpayer annually. This increase in disposable income is anticipated to boost consumption growth, which in turn could lead to greater wealth creation opportunities for Indian households through the stock market.
Ashishkumar Chauhan, MD & CEO of NSE, emphasized that more individuals will join the pool of unique investors, currently at 11 crore, becoming stakeholders in India’s growth journey. This influx of new investors is expected to support a virtuous cycle of economic growth, capital formation, and job creation. Furthermore, A Balasubramanian, MD & CEO of Aditya Birla Sun Life Mutual Fund, highlighted that the budget prioritizes consumption-driven growth. He pointed out that measures like simplified tax structures and a focus on agriculture and rural incomes should enhance overall sentiment and investment in key sectors.
Long-Term Outlook: A Promising Future
Despite the immediate market reactions, fund managers are optimistic about the long-term implications of the budget. They believe that the budget places Indian consumers at the forefront of economic growth. Sandeep Bagla, CEO of Trust Mutual Fund, remarked that the demographic dividend in India should create significant demand, which is a positive step forward. The resilience of the Indian middle class and the spirit of the private sector will play crucial roles in determining the pace of economic growth.
During the trading session, certain stocks like ITC, Zomato, and Maruti contributed positively to the Sensex gains. Conversely, stocks such as L&T, HDFC Bank, and Infosys faced strong selling pressure, pulling the index down. The day concluded with a loss of approximately Rs 17,000 crore in market capitalization, bringing the total to nearly Rs 424 lakh crore. While midcaps faced some selling pressure, smallcap stocks attracted investor interest, indicating a nuanced market landscape.
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