Mumbai: A focus on fiscal discipline and clarity on FPI taxation as reflected in the Union Budget came as music to investors’ ears, with the Sensex leaping nearly 486 points on Wednesday to close at an over 3-month high of 28,142.
Financial and realty stocks powered the show. Markets welcomed the budgetary proposals of infusing ₹ 10,000 crore in public sector banks and keeping long-term (LTCG) and short-term capital gains tax (STCG) unchanged for the capital market.
Additionally, finance minister Arun Jaitley proposed that category I and II foreign portfolio investors (FPIs) should be exempted from taxation on indirect transfers, which made investors a happy lot. Both key indices Sensex and Nifty reclaimed their key levels of 28,000 and 8,700 for the first time, scoring their biggest single-day gain since October 2016.
The Sensex, which kept moving in a tight range immediately after the Budget was presented in Parliament, started climbing and closed higher by 485.68 points, or 1.76%, at 28,141.64. This is its highest closing since 24 October last year when it settled at 28,179.08.
It had shot up about 504 points intra-day. The broad-based Nifty was also on the upswing and rallied by 155.10 points, or 1.81%, to settle at 8,716.40 after touching the day’s high of 8,722.40 and a low of 8,537.50.
The rupee firming up 40 paise to end at 67.47—a one and a half month high—helped pace the gains. “No change in long-term capital gains tax on equities has lightened investors’ fears on transaction cost. The budget has given a positive momentum in the market, the focus of which was to reduce fiscal deficit to 3.2 per cent of GDP in 2017-18. Infrastructure developments are welcomed by the investors," said Vinod Nair, Head of Research, Geojit BNP Paribas Financial Services.
Meanwhile, Nikkei Markit India Manufacturing PMI in January rebounded from the demonetisation downturn amid rising order books, production as well as buying levels and expansion in the sector by increasing to 50.4, from 49.6 in December.
Shares of state-run banks such as SBI, Union Bank of India, Bank of Baroda, PNB and Syndicate Bank hogged limelight and climbed by up to 5.64% as the government announced infusion of Rs10,000 crore in public sector banks in the next fiscal.
Also Read| Budget 2017: Here’s why bank stocks rallied
The Budget also allocated a record Rs3.96 trillion to the infrastructure sector. Also, the government announced infrastructure status to affordable housing to encourage investment and offered tax sops for developers sitting on completed unsold inventories, which triggered buying in realty stocks. DLF, Godrej Properties, HDIL, Oberoi Realty, Prestige Estate Projects, Sobha Ltd and Unitech zoomed by up to 6.74 per cent.
Major gainers included Maruti Suzuki (4.69%), M&M (4.64%), ITC (4.51%), ICICI Bank (4.40%), GAIL (3.76%) and Adani Ports (3.60%). The mid-cap index rose 1.77% and small-cap 1.68%.
Shares of companies related to the agriculture sector such as Dhanuka Agritech and Jain Irrigation Systems ended higher by up to 3.71% after Jaitley announced a whopping ₹ 1 trillion hike in credit target for the next fiscal to ₹ 0 trillion as part of efforts to double farm income in the next five years.
Foreign investors sold shares worth a net Rs532.88 crore on Tuesday, as per provisional numbers.
Asian shares ended mixed with upward bias while European markets were trading higher in their afternoon deals.