The sensex soared over 500 points on Friday but had pared much of the gains by the end of the session closing 212 points in the green or 0.6%. Stocks in just a handful of sectors – auto, consumer discretionary and real estate – rallied. Most measures that the finance minister announced as part of the Interim Budget for 2019-20 related to these sectors.
Vetri Subramaniam, group president & head-equity, UTI Asset Management Company (AMC), said the Budget puts an additional Rs1 lakh crore in the hands of households over the next financial year.
“It does this by way of an income entitlement to farm households amounting to Rs75,000 crore and a further Rs25,000 crore by way of income tax breaks targeted at middle class. This amounts to about 0.5% of GDP and is a fiscal stimulus. This builds on an assumption of strong buoyancy in goods and services tax (GST) collections,” Subramaniam said.
While the announcement of a rebate to tax payers boosted the sentiment as it would put more money in the hands of consumers there was also a concern that the large fiscal deficit could keep the RBI from trimming interest rates. Navneet Munot, executive director, SBI Mutual Fund, said: “The thrust towards income enhancement is positive for the consumption-oriented sectors.” He also added that, from equity market perspective, Budget would be seen as a positive event given the continued focus on income enhancing measures. Market’s focus will shift back to global cues, political developments and earnings trajectory.
Deven Choksey, managing director at KR Choksey Investment Managers, said: “Markets are volatile on the lack of clarity and confidence and there was profit booking after two days gains in equity market. Currently, this is a trading market and not an investment market.”
On Friday, foreign portfolio investors bought stocks worth Rs1,315.9 crore, while domestic investors sold shares worth Rs5.07, provisional data on exchanges showed.
Among the 19 sectoral indices compiled by BSE, the BSE Auto index rallied the most with a gain of 2.65%. This was followed by BSE Consumer Discretionary index with 1.8% rise and BSE Realty by 1.3%. Among stocks in Auto sector, Hero MotoCorp rallied the most by 7.48% to Rs2,807.35 on Friday. Other stocks like Maruti Suzuki, Eicher Motors, TVS Motors and Ashok Leyland gained between 3-5%.
The FM in his Budget speech proposed to extend the period of exemption from levy of tax on notional rent, on unsold inventories, from one year to two years, from the end of the year in which the project is completed. This move will help real estate players.