Benchmark indices Sensex and Nifty made a smart recovery in Tuesday's session, surprising many. The two indices gained even as the Budget proposed increasing short and long-terms capital gain taxes, and STT on F&O trades, dampening retail sentiment. The BSE Sensex recouped over 1,350 points to enter positive terrain. The NSE Nifty breached the 24,500 level briefly after testing the crucial support of the 24,000 level.
Barring the capital gains tax dampener for the investor community and removal of indexation benefit, the Union Budget was balanced and consistent in policy, said Amar Ambani Executive Director at YES Securities.
Ambani explained: "Brushing aside concerns around more populism, the target set for the fiscal deficit at 4.9 per cent is a huge positive. Agriculture package of Rs 1.5 lakh crore is along expected lines and will help provide a fillip to the rural economy. The slight relaxation in personal income tax slabs helps on the consumption front as well. There has been a material push in uplifting the financial health and borrowing ability of MSMEs," he said.
Ambani said there could even be a better budget next year, with the finance minister mentioning a comprehensive review of the Income Tax Act to simplify taxation and reduce disputes, as well as a customs duty rate structure overhaul to correct inverted duty structures.
The BSE Sensex, which hit a low of 79,224.32, recovered over 1,350 points from day's low post the tax hike-induced selloff. It was later trading at 80,404.17, down 89.23 points or 0.11 per cent. Nifty, after falling close to a crucial support of 24,000 level recovered. It was later trading at 24,472.05, down 39.40 points or 0.16 per cent.
Vikas Khemani, Founder, Carnelian Asset Management & Advisors said the overall budget appears balanced, with the new coalition government clearly focusing on agriculture, manufacturing, employment generation, youth skilling, MSME support, and urban infrastructure development. This budget sets priorities for a "Viksit Bharat.
"The increase in LTCG by 2.5 per cent and STCG by 5 per cent could have been avoided but it is not expected to significantly impact market sentiment. The budget maintains good fiscal discipline and yet focusses on channelising resources to the desired sections. We remain confident in investing in India and believe in the vision of Viksit Bharat 2047. Many sectors like manufacturing, agriculture, infrastructure and consumption will benefit from this budget," he said.
Radhavi Bhide, Chief Investment Officer, Kotak Life Insurance saud the Budget continued its fine balancing act between fiscal consolidation, personal tax rate attractiveness, and more importantly its focus on quality allocation to capital expenditure.
"Gross borrowing has been marginally reduced to a more comfortable level, which should aid in lowering the cost of borrowing. The bond curve is likely to be guided towards an anchored shorter end, due to delayed and shorter rate cuts, while the longer end is likely to be supported by limited supply pressure and a softer global interest rate cycle," the CIO said.
On the macro level, the government must be credited for keeping its eye on the prize, namely, maintaining fiscal discipline, said Shlok Srivastav, Cofounder & COO, Appreciate.
"There was a larger expectation amongst economists that the budget would be pro-welfare, to the extent that it would skew the fiscal balance. With the fiscal deficit targeted at 4.9 per cent, the government has reaffirmed its commitment to the fiscal glide path, and this is music to the ears of foreign investors and rating agencies. Effectively, it will bring in liquidity and a lower cost of capital for India.”