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Markets soar 2% mostly led by banks, India Vix drops 5%

Nirmala Sitharaman, India's finance minister, center, Anurag Thakur, India's finance and corporate affairs minister, left, and other members of the finance ministry leave the North Block of the Central Secretariat building in New Delhi, India, on Monday, Feb. 1, 2021. India's annual budget on Monday will be Prime Minister Narendra Modi's chance to spur demand and investments in an economy�cratered�by the world's second-biggest coronavirus outbreak. Photographer: T. Narayan/Bloomberg (Bloomberg)Premium
Nirmala Sitharaman, India's finance minister, center, Anurag Thakur, India's finance and corporate affairs minister, left, and other members of the finance ministry leave the North Block of the Central Secretariat building in New Delhi, India, on Monday, Feb. 1, 2021. India's annual budget on Monday will be Prime Minister Narendra Modi's chance to spur demand and investments in an economy�cratered�by the world's second-biggest coronavirus outbreak. Photographer: T. Narayan/Bloomberg (Bloomberg)

  • The FM announced a slew of measures to support the economy including a renewed thrust on capex and infrastructure spending

MUMBAI : Indian markets cheered the announcements made by Union finance minister Nirmala Sitharaman in Budget 2021. After an hour of the speech, the markets stayed buoyant with the BSE Sensex at 47,181.14, up 895.37 points or 1.93%. The Nifty was at 13,888.35, up 253.75 points or 1.86% at 12:06 pm.

The India volatility index or VIX dropped around 5% as investors’ anxiety and fears ebbed with the FM’s announcement mostly in line with Street expectations.

Also Read | How India can fight vaccine hesitancy

The FM announced a slew of announcements to support the economy including a renewed thrust on capex and infrastructure spending. The government has set a divestment target of 1.75 lakh trillion for FY22.

Bank stocks rallied with PSU Banks leading the surge. The Nifty PSU Bank index was up nearly 4%.

The government on Monday announced that it will set up an asset reconstruction company (ARC) and an asset management company (AMC) to house stressed assets currently in the books of Indian banks. That apart, the government would also infuse 20,000 crore into public sector banks as part of its recapitalisation plans. The Economic Survey released last Friday had called for a clean up of bank balance sheets after the forbearance to be accompanied by a recapitalisation.

"Consolidation of several securities laws into a single code will provide certainty and stability to deepen and strengthen Indian capital and debt market," said Suraj Malik, Partner - Transaction Tax, BDO India.

The Economic Survey, a precursor to the Union budget, projected nominal GDP growth for FY22 at 15.4%, and reiterated the focus on healthcare, infrastructure, incentives for domestic manufacturing and supply-side reforms.

Indian markets have not only recovered since the crash in March last year, benchmark indices have hit record highs multiple times as investors build expectations of a faster-than-expected economic recovery. However, the Sensex has lost nearly 8% from the record high of 50000, in one of the sharpest declines in the stock markets last week. This year, Sensex lost 3% in a month before the presentation of the budget while it slipped 4% last year. In three out of five times, the Sensex has given negative returns in a month prior to the budget.

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